105 – Commodity Deflation or what the hell happened to grain prices?

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Commodity Deflation

Grain prices suck right now.commodity deflation grain prices

And, Fertilizer Prices Increased ??????

OK, where am I going with this.  Profitability in farming is going into the tank right now.  Talked to a very good farmer and with him using $360 an acre cash rent, which could be low for his area, he needs over $10 and close to $5 for a break even price.  And, he was using 68 and 220 as yields for soybeans and corn.

Now, he is not in trouble he owns enough of his own ground to get through this, but he is in a “big farmer / high cash rent district” and on many of his neighbors it is going to be tough.

Consequences????

Only 86 million acres of corn gets planted.  Not as much seed corn has been ordered let alone paid for as in the past.  They know what the numbers are and from what I hear that is leaking out it is not good to be a seed corn salesman this winter.

Of course at $300 a bag for seed of  commodity that is half in price what it was 2 years ago is hard to swallow.

$3.74 and $9.57 is not allowing for a profit on the above cash rent acres.

Now the fertilizer guys are figuring that we did not get it applied in the fall so they can charge us more for it in the spring.  They also can send the fertilizer to South America.

And, if we don’t plant the corn and plant more soybeans do bean prices go into a free fall?????

Do acres way out west even get planted to something this year when the prices they have out there because of transportation issues are at a loss level????

Looks to me spring wheat may be their best option.  Grain prices are really low in the northern plains.

Insurance levels are at a losing point in many scenarios right now.

Good elevator manager told me today $3.75 cash corn will buy a lot of bushels if it ever gets there.

Where does one start to price new crop??????

Cycle lows due about now?????

corn mid Feb. 20 &40 week lows

wheat mid Feb. 20 & 40 week lows

soybeans 3 year low last fall 16-18 week low about now

These ideas are from a very good commodity adviser.

But, do we rally much from here????  Most farmers are in the “hope so” column.

Livestock well off their highs.  Beef expansion is underway and more than the experts expected.

Oil is lower and will help with some costs, but not near as much as the general commodity inflation that is underway.

Baltic Dry Index made a big low today.  Does it go lower?  Why is it important?  Back to 1986 levels.

Greece is an economic mess.  So is much of the rest of Europe.

U.S. Dollar is going up in value which lowers the price of all things in dollars.

High US dollar in the 1980’s really killed agricultural exports.

Ukraine is a mess, French tanks are heading to Poland, Ukraine is moving its tanks east.  Russia is totally dependent on energy prices.  Will Putin go down without a fight?

US stock market looks toppy????

Look what happened to the Swiss currency.  Is Hong Kong next????  What about the 800 pound huge Nation in the world China??  They are buying lots of agricultural stuff.  Lots!!!!!!

Gold and Silver, have they put in a bottom???

So what is my marketing and crop insurance plan???

Am I in my 1980’s survival tactics????

 

One Comment

  1. Johnny Doe said:

    Thanks to big government farm insurance schemes we in ag all get to suffer from the results of massive profitability and income guarantees recently given to growers experiencing massive profitability who with these guarantees rapidly drove up nearly all costs of growing crops.

    February 22, 2015
    Reply

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