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| As it stands now we have an oversupply of 3-3.50 corn and probably just enough 2.50 corn and it looks like we are working on a similar situation in beans.
We do still have money in ag that wouldn't normally be here because of low interest rates (no place else to park money) and lack of other exciting investments. This is what will keep things from moving too fast, until it does. As with all commodities, they get over produced, especially if they are overpriced and subsidized. The result, fundamentally, is lower prices. These lower prices attract more demand and generally less production and the overs supply starts to go away. At some point prices will rise to encourage more production and ration use, but it's going to take a while.
One rule of commodities is that they are cheap and plentiful. To really win the game on the production side, we need to grow very high yields for not much more cost than typical yields so that something like 300 bpa at $2 works. Yields have been coming up, but costs are still high so there is a cap on pushing for higher yields through more investment in the crop (prices won't support it). It's hard to say if technology will outpace dropping prices, but companies won't be giving that tech away either.
As far as us farmers are concerned, nothing changes until we change our demand structure - if we still will pay top rents because farm credit will still back us or keep buying expensive seed and other inputs, there will be no change in our cost structure to help with low prices. The last time we farmers actually changed, a whole pile of us had to bankrupt. It may end up that way again. Landlords and input suppliers have little reason to make any changes if they have no problem selling everything they have. | |
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What happens next
