West Central Alberta Coldest, wettest edge | Sat - 11/19/2013 23:21 Here's pretty much why I've been the bad news bear. Corn futures until just recently spent 30 months over $6.00 and roughly half of that OVER $7 The 18 day (month) MA topped at $6.99 this past June,meaning that was the average price for the whole dam 18 months was 6.99 Look at the rise we had in acres because of 2008 when we had only 2 months over $6 with a quick run to 7.65 then we tanked very hard along with everything else except Gold. The only years to compare this long lasting boom in Ag is the 1970's. Back then it was the Russian grain bonanza,now it has been ethanol. Ethanol,or sugar being make into ethanol caused the worlds sugar markets to sky rocket,only to have that crash because of sky rocketing production. Cotton pretty much the same deal. All this crops had sky rocketing prices,sky rocketing acres and they crashed because of over production,not just in the US, but world acres. Why would corn or beans be any different ? Then CRP maybe you guys dont see this in the heart of the corn belt,but ND and Northern Mn there's hardly any left. There's a guy i kinda know bought many 1/4's of CRP in northernish MN payed some pretty good money for marginal dirt. Do you really think he's gonna plant it back to grass ? Even with say $3 corn ? Yes its not prime north I-80 stuff but its production never the less on $1200-1500 land.....You may be surprised how long he will plant corn and beans with land cost 10% of that prime I-80 ground...............Think about that for a little while. Then world production of "feed grains" My first thought goes to Brazil,breaking virgin ground,grubbing tree's/brush,picking sticks,working it,liming it,disking it,liming it,working some more to raise corn or beans. Do you really things he going to let this land grow back to brush ? AGAIN with land costs a faction of I-80 When I was pretty young,I remember asking my Dad why some junk junk land was originally broke out of virgin pasture and cows ? He answered "that was the $6.00 wheat in the 70's and everyone seeing dollar sign's." Is it any different this time around ? ? ?
Sat, I think one piece of the puzzle which you are not including is credit. Will the Brazillian be able to obtain the credit to keep planting all those newfound acres in the face of tight to negative margins, the same may be true in this continent. It is certainly true in the FSU where credit was nearly impossible to obtain before this all started, and much is being done by foreign investors, they won't stick around long. As I understand, credit for farmers dried up in Australia in recent years, resulting in some being unable to buy inputs, and acres left unseeded. All this happened with high prices, what happens when prices are half of that? Farmers may have all the big intentions, but in many cases the banker gets the final say. Not sure how this all played out after the past cycle, but from what I've read on here, it was the lack of credit to put in a crop that finished many operations off, thanks to ill balance sheets. Not sure how long it will take to have an effect, or how many farmers are so well capitalized that they can afford to plant a few years without credit? |
Why all the doom and gloom?
