Latest Ag News January 3, 2016
Quick Take Away
Things are quiet and boring in the grain markets here in the
USA. The big action has been the
weather, which has been incredibly wet, and the cattle markets which have been
all over the board and making a few historic moves.
First, the boring stuff.
Corn and beans continue to move sideways or lower. Ample stocks everywhere in the USA and abroad
are going to keep prices low for a long time.
Oil is still plentiful and cheap.
For the first time in the past 40 years, the USA actually EXPORTED crude oil out of the country. Look for this trend to continue as we are
basically over filled to capacity with our available storage for crude oil in
the USA and desperately need the storage space that these oil exports will open
up.
When reading the news, I always find it more informative to
look for the TRENDS in the news coverage more so than what is actually being
SAID in the news. Look for something that is being covered or
mentioned for the first time if you really want to understand which way things
are headed. Case in point: Crop prices.
This past week, for the first time in forever, I noticed that two
separate crop price gurus mentioned the possibility of the corn price going as
low as two dollars per bushel , maybe into the two dollar range.
That’s crazy stuff and a real huge problem for the whole agriculture industry. Farmers can’t make money with that low price,
and for sure when the farmers run out of money the all the supply industries
are going to suffer big time also. John
Deere, Case, Syngenta, Pioneer, Monsanto and right down the line are going to
take huge hits.
In that same vein, farm land prices continue to decrease
also. Reports of 4% decrease in Iowa,
which has the best farm ground in the USA, are the harbingers of things to
come. And as land prices decrease, the
poor guy trying to grow corn just loses more equity which adds fuel to the fire
of his financial meltdown.
Really, it’s a big mess.
Just ask some Agriculture bankers.
Reports are streaming in of banks tightening credit just when farmers
are needing a lifeline. Same old story,
same old song and dance.
Now to the big news!
I mean, what the heck is going on here?
The cattle markets got turned on their head this week. Two major events cause all the
disruption. First, the wet weather. As you know, we feed cattle outside here in
the USA in large feedlots that typically can hold 50,000 or 100,000 head of
cattle at a time. This system works fine
most of the time except in wet weather, which causes everything to turn to
mud. So the cattle end up not gaining
weight because they burn up all their calories just trying to negotiate the
trip to the feed bunk through all that mud.
If you combine the mud with cold wet weather, you have a double
whammy. The animals just cant gain
weight like they are programmed to do.
This wet weather caused the second problem that tipped
everything upside down and that was that in the week of December 18th,
slaughter cattle averaged 10 pounds LESS than the previous week. That is a huge number in the USA, and if you
multiply 10 pounds across all slaughter cattle currently in feed yards, the
decrease in meat volume is huge. One day
last week, fat cattle were actually up 12 cents a pound in a single day. Of course, feeder cattle have followed this
trend up and have gained about 10% in the past 2 weeks.
It nuts. On one hand,
tens of thousands of fat cattle are hitting the slaughter plants and posting a
$700 per head LOSS, but on the other
hand we are seeing some historical daily gains in the market.
Nothing is for sure yet, but it looks like the cattle market
has turned around and that fat cattle and feeder cattle have bottomed out and
are heading back towards profitability.
Everything else has been fairly quiet over the
holidays. Tune in again next week for another
episode and as always, this has been brought to you by Breedex USA, your source
for export of quality beef and dairy genetics!
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