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Hog Buildings and other ramblings
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Dave Cen.Ia
Posted 1/12/2008 13:20 (#281557)
Subject: Hog Buildings and other ramblings



Nevada, Iowa
I was reading below in the "mixed emotions" thread and I too have mixed emotions about all of this. One thing that really stood out in that thread and many recent posts, the overwhelming percentage of posters seem to be very bullish at this point. That in itself seems to be a bad omen.

There is a lot of talk about demand that won't go away. I agree that there is unprecedented demand but the longevity is what is cloudy to me. How long can an ethanol plant operate at a loss? Right now they are averaging cheaper contracts with higher cash prices, that will slowly disappear. Could a plant geared solely for the production of ethanol, slow production or shut down for awhile to decrease losses for their shareholders?

And I was also curious about contract hog production. There have been some buildings go up in the area but many outside of this county. I think they are on the basis that the "farmer" puts up the building and the "company" puts in the pigs for a set fee per head. There has to be a safety valve in these contracts giving the "company" a plan b in the event of unprofitable periods. Are these producers guaranteed hogs all of the time? I can't imagine a contract with a large company that has a fleet of lawyers, that won't leave the owner of that building holding the bag when the chips are down. I am very concerned about the future of livestock production in the US. It certainly looks like we are in for one more round of liquidation. This should finish most of the few independent producers that are left.

Finally, all we have been hearing for the last year or so is how this market is fund driven and as soon as they decide to leave, it will crash. While the story unfolds and there is increased demand and supposedly less supply, the funds haven't left the building, have they? I would think, as elsewhere stated, the funds should be in to this commodity market even heavier now with disappointing stock market performance. Does anyone have a quick handle on the percentage of funds in this market and if that percentage is as much as I think it is, should we lose sight of the volatility that it could bring with it?

Pardon my ignorance, just random questions on a snowy day in central Iowa
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