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| Unless you can predict weather cycles, 4 to 6 years doesn't make a lot of sense. Besides that time frame is too short. If your started farming in 2008, maybe it seems that way.
We always set up for a perfect storm that lasts for years. I think this is just the result of the way we run our businesses. Anyone cut back on production lately? Nope. The whole industry has the goal of increasing yields and it can be argued that we "win" by being able to sell $2 corn and still make a profit (ie. 300+ bpa corn on average ground with average weather). Anyway, this isn't a smooth process and we always outproduce our demand. Probably the only time I've experienced a sustained demand pull market is after ethanal started and the booster rocket of 2012 occurred. Both situations really can't be counted on - massive government action and an enormous drought.
The reality is that it doesn't take a few I states having record breaking years to create a big surplus. Grains are grown everywhere now (yes, they are making more land) and we have a much bigger production engine than in the past and no downsizing in sight (we've discussed how "fringe" areas may have better economics than typical corn growing areas).
It's not doom and gloom, it's just what it is and has always been as far as I can tell. Lots of folks seem to think price levels of everything that goes into farming will magically hold it's value because of old money, investors, Trump, Hillary, space aliens, etc. No one is interested in spending just to keep values higher. Banks are not interesting in giving away money to support seed, fertilizer and chemical prices, but they do like lending money. At some point their concern over getting paid back trumps their desire to lend. It's already happening with higher down payments required for land loans - farm credit wants 30% or more down so does that mean they think $10K land is actually worth $7K. It would make sense that a bank would think it's ok for the buyer to throw away his/her own cash, but they can't throw their money away. | |
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It is what it is
