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cropsey, il 61731 | Maizing, your playground is basis and carry while flat price tends to be what producers (like me) are concerned about. Especially over the past 5 years basis couldn't wasn't even a concern when flat price moved by 50 cents a day. Pick a price a guy was happy with and sell regardless of basis (which is generally what you advocate - make an offer). Coming back to the earlier 'reality' of grain prices makes basis a bigger percentage of the price and it may change more than flat price the way things are going lately.
It's a little difficult to get back to the mindset of picking up an extra 5 or 10 cents on basis improvement when we generally assured price would move 10x that amount in a short amount of time. Right now bulls are thinking we will certainly move a $1 higher on corn and maybe more on beans just because it 'always' has (in the recent past). The decision right now is whether to use pricing/basis strategies like we use to in the 90's (hang out in your playground) or 'know' corn will be back over $4 right after harvest.
We are heading into a big unknown this fall with the possible outcomes:
1. Big crop gets bigger or stays big enough that prices are pressured into the levels of the 90's
2. Crop comes in unexpectedly smaller with demand staying strong and price makes a recovery back to cost of production
3. Crop is what it is and funds, having no better place to park money, start going seriously long and run the market up (because it's at bargain prices now)
4. Crop is big and funds love the down side and short it below LDP levels.
No doubt low prices encourage usage, but the high prices have beat up demand pretty well. Cattle are going to be slow to recover and hog guys are still paying off debt though sticking extra pigs in every finisher and growing a little larger will consume more feed (if the pigs are alive and not dead due to PED). With all the 'news' swirling around about HFC and various oils that obviously cause death at 102 yrs old, it's hard to see where food demand is going to be. Also, this economy, regardless of what talking head say, is not doing very well. While there are folks getting wealthy, too many folks are unemployed or underemployed and that where real demand numbers come from (a few hollywood actors don't make a market).
This could all be completely wrong | |
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Maizeing, continue discussion on price setting
