$8 corn!! $8 corn!!

Ok,so tell me where I can get $8 corn. Every where you go, "well, with $8 corn rent should be this, land is worth this, you can afford this, blah blah, blah. Just recent comments all over. Mostly from people that do not farm, own some land that they would like to break and rent out, and even some landlords. Only one of mine played that card, but we still settled oon a reasonable lease agreement after asked him to show me where I can find a cash bid of $8, or even $7 corn for 2012,2014, and 2015 corn. Showed him seed cost, spraying cost, crop ins cost, fuel,fert cost, lime cost, harvest and delivery cost"s, and rent cost, on 100 bushel max land. Why is every one that isnt raising corn tossing out $8 corn? One guy,actually a pretty smart person even stated "100 bushels an acre at $8, that $800 an acre, must be nice be nice to just put a penny in the ground and pull out a $10 bill". Good greif. Thank goodness for decent landlord"s and long term leases

They were just talking on AgDay this morning about how you'd better be grabbing contracts at $5.50 for fall delivery if you can get it.

I don't think any landlord around here cares about the true cost of production and the risk of poor weather and so forth. I guess if I were in their shoes I would only worry about top bid, too. The only problem with the dream of today is eventually tomorrow comes and that day can be very sobering. The commodity market will return to more historic prices or the suppliers will raise their prices to the point where margins are as thin as they were back in the 1980's. More operators will be forced out and the landlords will have fewer bidders to force top rental rates.
For me personally I can only hope things progress to a point where operators can't think about paying obscene money for rent given the risk. I live in an area where truth be told that even in a good year a lot of fields might make 150 bushel corn tops. Yet guys are paying money like we were in 200 bushel corn across the board. I would be seriously tempted under the right circumstances to rent mine out for a year if corn looked like it was going to be 3.50 to 3.75 (with no adjustment for inputs) and some wild-eyed fool wanted to pay like it was 8.25. Rent would be paid in full upfront, minimum fertilizer required according to test, tiles have to be fixed or working if damaged, etc..

I sold a few loads for $8. I also sold a bunch for $7.80 just last month but I also sold a bunch three years ago for $4.50 that I had forward contracted. It was $3.50 when I planted.

This current high grain market started when Russia had a short black wheat crop. Then they announced that they where not going to have any wheat for export. That caused the markets to take off.

An old economic professor told me in the 1980s that there was only one constant in the economy. "Raw commodities will get cheaper over a long period of time". What he meant was that if you look at raw commodities over a long period of time and adjust for inflation the value will be lower. I have watched and he is correct. This corn high grain market is a short term thing. It will not last for much longer. Our production cost does not make any difference to what the grains will be worth.

Also the "real" value of the US dollar is 20% lower than it was in 2005. The Fed printing money does have an effect.

Also another thing a few Ag economists told me is this " There is nothing that a farmer can not produce into worthlessness". Think about that one. Any thing that goes up in price causes just about every farmer to jump into producing it until it is worth less than the cost of production and then many will drop out. Seen it happen time and time again in tobacco, hogs and cattle. It is corn this time around.

Corn is the current high prise thing they are doing this on. They are tearing out fences and old building sites. Plowing up any hay ground they can. What many are not noticing is that this is happening world wide. South American is harvesting their largest crop they have ever produced. I read where South Africa is exporting corn now. So the farmers world wide are gearing up to produce corn. An many of them will have a lower cost per bushel than the American mid-west does. They may only have a fifty bushel yield but their total cost per bushel easily could be less.

It is going to be very much like the early 1980s when this goes south. The land rents are double what they where just 4-5 years ago. Equipment prices are 50% higher than just 4-5 years ago. Double what they where 10 years ago. The only salvation maybe that interest rates are not currently sky high but that could change in a hurry. The Federal Reserve is artificially keeping interest rates down. The high government debt will eventually cause higher interest rates.

Also some one will eventually let the people of the USA use the new technologies to get the fuel reserves that are located inside the USA to market. When this happens and the price of oil goes down then ethanol production/price will go down too. So the demand for corn could easily go down and the supply go up. We all know what the price of corn will do when that happens.

I recommend that anyone producing grain keep their horns pulled in and be ready for a price drop. Many grain farmers will go out of business. I think many will be surprised too when no one will feel sorry for them like in the 1980s. There will not be many sweet heart buy downs this time around. The average citizen is tied of giving hand outs to farmers that make more than they do. There should not have been any type of Government payment the last few years. Those payments have soured many urban tax payers on helping the farmers. That will bite us hard when this market goes south. We very well could not get the votes in congress for a farm bill that would help in low markets. The current high cost of crop insurance is getting looked at real hard by the congress.

The good times will end shortly. We just do not know exactly when. You are going to have $7 input cost in a crop that you will sell for half that. Being a mega farmer will not be an advantage when this happens.

Yep,the cure for high prices is high prices.
Then there was Jerry Ford's advice to plant fencerow to fencerow followed by Carters grain embargo.
Probably won't be any movies made about the crash this time unless they wait and do it after there's a nnalert in the White House like they did after Reagan was elected.

If you want to see what's gonna happen,follow the ongoing saga of Mike Stamp here in Michigan. He was a finalist for Top Producer of the Year last year,I got the sale bill in the mail the other day for the land that he owned. Dennis Boersen just bought the rest of his assets from bankruptcy court for 22 million. Wouldn't want to be in his shoes when it all comes crashing down either.

The adjustment is coming. Count on it. Before every major downturn in the US there were both common people and experts who said "it can't happen" but yet it did. There is more than one way to tank an economy.

We hit $8.00 for a short time. The top in this area yesterday was $7.52 at a feed mill with a .32 positive basis. Will the landlords come back down when corn goes to $5.50 or less? They are accustomed to a high income by now. Jim

Not willingly. The problem I have locally is there are farmers who are using money outside from farming to fuel their operations. It all depends on the discipline of the individual but it is known a couple of these guys plan to use their reserves to pickup ground as prices decrease to hopefully have long term control as they decrease their own offers on rent. The Mennonites as a separate group are all about picking up ground for the next generation with a heavy disregard to cost.

Corn for Oct delivery is $5.37
Nebraska markets

Excellent analysis of the current situation- I believe that many who are raising only grain have lulled themselves into thinking that since the input costs are so high, then the revenue from that crop just has to keep up. Few understand that the cost to produce a commodity has nothing to do with the price received- and we all are pretty much price takers in agriculture, not price makers. When this all does go south, it will be a mess for many, but as one neighbor told me years ago, "more farmers are ruined by good times than by bad."

In addition countries such as India who were not players for inputs when the ag economy plunged in the early 1980's are active buyers for fuel and fertilizer so these suppliers will not be so ready to sell at bargain basement prices.
My own little story for the wisdom of an old college professor is one marketing instructor always said if the Ukraine could ever produce to its potential the rest of the world better look out. The Ukraine has good soil and adequate moisture but a short growing season. The instructor said if 80 to 83 day corn could be perfected there would be a boom in Ukrainian corn production.

Seems to me corn spiked at about $4 for a while about ten years ago before falling back to $2.50 again and staying there for a while. Price spikes happen all the time. It did that just before Carter embargoed the Russians, too. It's just a temporary gift horse. Don't look it in the mouth.....

I agree that commodies like grain get cheaper over time - corn was $2.00 a bushel in 1918, adjusted for inflation it should be $30.16 today. When adjusted for inflation $8 corn is still cheap. No one would/could sell corn for .53 in 1918.

I don't see a big price drop coming, I see input costs rising.

I totally agree with the last statement about good times causing more harm than bad times.
I think a lot of that comes from people not having a long term plan and sticking to it. Instead they go for the knee jerk reaction to what's happening right now. Adding to that is the availability of cheap debt acting as an enabler. Granted you need to have some flexibility to be able take advantage of short term situations. But how many of those folks paying big bucks for leases will be belly up if & when corn is $4? The trouble comes in when you lose sight of the long term goal and want it all right now.
Proof of that is the data out today saying the majority of workers in the US have less than $25000 saved for retirement.

During the increasingly rare periods when free market forces determine the price of commodities prices generally go down or level off in price even when demand increases for normal reasons, such as population growth, this is mostly due to advances in technology and production practices. Minus government meddling there would have been no $8.00 corn in this decade to begin with. The latest attempts to expand ethanol production have been stopped by the auto companies, oil prices will be around $50.00 before year end and there will be even less reason to continue the scam.

Farmers could be price makers if they didn't continuously shoot themselves in the foot:

When the market's good, they produce more to take advantage of the high prices, and drive the price right back down.

When the market's poor, they produce more to make up for the shortfall in volume, and drive the price down even further.

Well said, JD. I agree wholeheartedly. It reminds me of something a fellow told me years ago. "The greedy turn into the needy". Never forgot that. Mike

Why will oil prices be $50? Another massive economic collapse?

I know the EU is trying its best to drive capitol from its shores - do you think they will succeed?

Cracked corn in 50 lb bag, $14.50 at Farm and Pet , last week. $1.00 per bag less for shelled , and you grind it yourself!

I am fully prepared for $4 corn. Last year in the spring I read article after article saying that we should all be prepared for $3.50 corn at harvest time. I was guessing about the same. Then, there was a drought. Panic ensued and the price hit $8.50, with many saying that $10 corn and $20 beans might occur.

They were saying that because of the early spring and planting conditions being so good, everyone should have been rolling in corn. Then the drought. It's all speculation. So, what will be the prediction this year? For me, after driving to Akron, Ohio and getting a glimpse at the field conditions out that way; I would say it's a great year to plant rice. I have been keeping an eye on the extended forecast and it doesn't look like we are getting any weather breaks for field work anytime soon.

diversification is always the key. putting too many eggs in one basket never works. It's gambling at that point.

I guess I'm lucky to have a market for all that I grow. corn, beans, soft red winter wheat, hay.

(quoted from post at 09:16:12 03/19/13) During the increasingly rare periods when free market forces determine the price of commodities prices generally go down or level off in price even when demand increases for normal reasons, such as population growth, this is mostly due to advances in technology and production practices. Minus government meddling there would have been no $8.00 corn in this decade to begin with. The latest attempts to expand ethanol production have been stopped by the auto companies, oil prices will be around $50.00 before year end and there will be even less reason to continue the scam.

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Oil prices may be $50.00 in todays dollar, although I'm not sure where you got that idea, but what will the dollar be worth then? As someone else said, input cost are sure to rise, and on more than just corn.

Growing the crop is only one part of the equation. A man had really study the marketing of the crop now days. Getting the right price is going to take a lot of market watching. Just like these antique tractors just because you have 4 thousand in a M farmall does not make it worth it. Farmers may end up with 7 dollar a bushel in corn but sure does not mean that is what it will bring.

It'll all be back down to earth soon. You know how I found the Farm show in Louisville? Followed the $70,000 4x4, diesel, duallies. I'm glad for them and happy with what I've done in the last several good years, but boy the future is a little scary. Many guys around here think the midwest is the only place to grow corn in the world. There's a lot of other places and $8/bushel got their attention big time. I need to update my 2188, what'll think a good 2388 will be going for in a few years?!?!

they should have broke some of the farmers that were in too deep to sell out in the 80's, instead they gave them write off's and sold out many that they could still get their money out of, those that they wrote off are now pushing rents and getting bigger, hopefully this time they will go broke as they should have 30 years ago, if I stuck my finger in the eye of some on here so be it!

when people start talking about $8 corn I refer back to this chart. It is not all inclusive but shows prices not adjusted for inflation over time and key events. I do not believe it useful to predict the future but it is clear prices can easily drop to half of their previous high.

Sorry I can't make it much bigger. The chart is a continuation of a graduate research course a few years back.

-Paul

To avoid collapse the adminisitration is going to soon do a 180 on energy policy, they will continue to tout ''green'' to satisfy their base but have to be realistic at some point to save zeros legacy.

Bravo to the automakers.