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Drought/ price peak
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indeeppigfarmer
Posted 6/6/2021 12:27 (#9044691 - in reply to #9044516)
Subject: RE: Drought/ price peak


The cost of a weaned pig for many who had disease problems over the last years is much different than you may be perceiving. That in itself is taking a lot of the profit out of the equation for a lot of producers... regardless of feed cost. Most guys I’ve talked to seem to have a lot of their corn needs booked in the less than $5.00 range. If weather problems continue or worsen, that inventory will be stretched into the new crop timeframe by reducing days on feed. As I’ve said before, prices are doing what they can to push old crop inventory into the new crop timeframe.

While ethanol margins are good, the same thing will happen there. As this rally unfolded, they bought a lot of corn for 3.50 -5.00 for July delivery. They are probably running different scenarios on how long to stay open, and how much extra downtime to take this summer. If they have 90% of their July needs bought at $4.xx , if they want to run full bore, buying the last 10% at 6 or 7 something doesn’t change their average input price that dramatically. They have options.... slow down to 90% of capacity, they don’t need to buy any.... slow down more than that, and they are stretching their inventory into the fall. Shut down for a couple extra weeks, or a month, and retain purchased inventory for startup, or resell into the cash market to someone who really needs it.

Those who think that today’s prices are not affecting demand ... today and through the rest of the year are not thinking the whole process through.
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