OT Farm Equipment downslide

Kinze announced 215 out of 800 layoff today.

I do not understand why corn was so expensive, then fell off so quickly, comments welcome.

David it was a world wide shortage of feed protein that cause the start of the price raise. Russia announced that they had the second year of their feed wheat fail so they would not be exporting any of it. This would have been in the late summer of 2010. Then you couple that with demand raising here in the US with the mandates for Ethanol usage. This caused a shortage of feed grains. It took 3-4 years for production world wide to rebound. Now there is a world wide large supply of feed grains.

The trouble is the record high prices brought ground into production world wide not just in the USA. Much of this ground will stay in production so the US production will not effect the crop as much as in the past. I think we could easily see many years of low prices.

What really key it to me was when I read several years ago that South Africa was exporting # 2 yellow corn. That proved to me that the high prices just expanded the production in countries where grain had not traditionally be raised. Look around you home area. How many pastures where ripped up??? How about over along HWY 1 where they did a lot of work just to gain 50-10 feet along that creek just north of Mt. Vernon?? Mush of these extra acres will stay in production.

JDS

I think you'll find that South Africa has been in the corn business a long time - maybe not as an exporter.

Even when they were "unmentionable" they had a bloody high tech agriculture sector

Research commodities for the last 100 years there is always a cycle and everyone always
has a long list of reasons why prices go up,down and of course those that say "It's different this time". The only really certain thing about prices is High Prices bring
Low Prices and Low Prices bring High Prices.Those folks getting into to the cattle business now will be floating in Red Ink in a year or two,I've culled my herd hard and will keep replacements when the price drops and you can't give 'em away again.Plus it always takes a whole lot less time for the price to drop than it does to go up.

Here in my area{s.west cenrtal Ia}there are some farmers that are putting their good productive land into the CRP for Pheasant population and getting right at $300.00 per acre.

I disagree. The US production has already slowed dramatically. BTO here has well over 20 pivots that aren't in corn, that normally are. Give the US farmers/land owners another 4 or 5 years, and we will have another round of CRP bail out.
The US farmers haven't stood on their own since the early 70s, when Cater did the grain embargo.

(quoted from post at 21:57:54 06/24/15) David it was a world wide shortage of feed protein that cause the start of the price raise. Russia announced that they had the second year of their feed wheat fail so they would not be exporting any of it. This would have been in the late summer of 2010. Then you couple that with demand raising here in the US with the mandates for Ethanol usage. This caused a shortage of feed grains. It took 3-4 years for production world wide to rebound. Now there is a world wide large supply of feed grains.

The trouble is the record high prices brought ground into production world wide not just in the USA. Much of this ground will stay in production so the US production will not effect the crop as much as in the past. I think we could easily see many years of low prices.

What really key it to me was when I read several years ago that South Africa was exporting # 2 yellow corn. That proved to me that the high prices just expanded the production in countries where grain had not traditionally be raised. Look around you home area. How many pastures where ripped up??? How about over along HWY 1 where they did a lot of work just to gain 50-10 feet along that creek just north of Mt. Vernon?? Mush of these extra acres will stay in production.

Click to expand...

We aren't a huge corn state (Michigan), but we had property near me that had not been in production in the 30 years I've lived here, bulldozed out, and planted to corn. They are still cropping the land, even now that prices are down.

Many dealers near me say they are selling sub compact small tractors but not much in large farm ones. Same for implements.

The short answer is because of government meddling in the markets. Increased ethanol mandates in 2007 set the initial stage for increased ethanol and corn demand, many new plants were built and by 2009/2010 the market recovered from the recession and took off producing more than the mandates and exporting the difference. Then the 2 year drought followed in the Midwest which decreased supply of corn and increased the corn price which was followed by at least two years of record corn crops at the same time oil production was hitting all time highs which put downward pressure on ethanol demand and corn prices, oil prices then collapsed which in turn made ethanol less profitable or a loser putting further downward pressure on corn prices.

The US Farm Report has a fifteen minute session once a week explaining the goings on with the Ag markets. I watch it Sunday Morning at 6 am on a local tv station, I don't have cable either. You can also watch it, at your conveyance, on line.

I don't don't know how to post a link but you can Google US Farm Report and it will come up.

Thanks much for all the comments, I tend to spend all my time working and do not get time to look at the research behind these things.

(quoted from post at 04:50:35 06/25/15) The short answer is because of government meddling in the markets. Increased ethanol mandates in 2007 set the initial stage for increased ethanol and corn demand, many new plants were built and by 2009/2010 the market recovered from the recession and took off producing more than the mandates and exporting the difference. Then the 2 year drought followed in the Midwest which decreased supply of corn and increased the corn price which was followed by at least two years of record corn crops at the same time oil production was hitting all time highs which put downward pressure on ethanol demand and corn prices, oil prices then collapsed which in turn made ethanol less profitable or a loser putting further downward pressure on corn prices.

Click to expand...

What? The government wasn't medaling before that when they bought up the overproduction to artificially keep farmers in business?

What effects the markets today is simple supply and demand. With current gas sales and the ethanol mandates ethanol consumption is up, not down because more people have disposable income that can be used to fill the tank.

Basically what happens is that farmers in general plan on planting what is going to make them the most money per acre. So when corn it record highs everyone planted corn. USDA reported the next spring that 33,000,000 acres over and above what had ever been planted to corn before was now in corn. Add in a record harvest plus another grain embargo to Russia and corn fell flat. Then farmers, still riding the wave put up bins like mad to store that corn a lot of which is still in the bin close to 2 years later. Just waiting for prices to go back up. Well add in last years production with a lot still in bins, plus some from the year before still in bins, plus what's in the ground growing now and I don't see prices rebounding anytime real soon. Now it looks like beans are everywhere. Going to be interesting to see what bean prices are going to do this fall.

Draw your own conclusions.

I expect to see a lot a failures over the next 18 months. I hope I'm wrong but it's how I see things. Some have already failed because they just can't borrow any operating capital. They are stretched way too thin.

Rick

Spook, around here, the Dutch/Belgian Mega
dairies(unaccountable road wreckers), say it is
cheaper to buy wooded land and clear it for
farmland. When farmland around here was
$8500-10,500 per acre, they were buying
woods for around $5000 acre and removing
EVERY tree at a cost of $2500 per acre. It really
was too bad, lost a lot of VERY nice productive
woodlots. Not just small ones, but 50 acres of
mature timber, ALL went into burn piles. Instead
of selling the timber off and selling the rest for
pulp or biomass, where it could have made
them money, it went up in smoke. When I asked
a couple different farms' managers why they
didn't let it be used/sold, they said, "they won't
clear it as fast as us", and "we don't need the
money". What a waste! At least now that land
prices around here have dropped 25-30%, they
haven't been doing this AS MUCH. Sickening to
me.

Ross

Either I did a poor job of explaining myself above or you have reading comprehension problems becaue you did not understand any of what I wrote. Of course the farmers over planted in response to demand but a fair percentage of that demand was created by government meddling in the form of EPA mandates to produce certain levels of renewable fuels by 2015, this created an artificial supply for ethanol above what the normal market would have required, the same way that the CRP program artificially inflates land rents and purchase prices, these type of increases are in response to government initiatives, not free market forces at work.

In this area, it wasn't old woodlots as much as property that had been sitting for years without being used. I heard that the farmer's rented the land, with very low rents, for something like 5 years. That covered the cost of clearing it. A couple of examples - the SE corner of Grand River & M59 had been a abandoned dairy farm for 30+ years, covered in Russian olive, and vacant. Zoned commercial, it has never been developed. About 2008? it was cleared and is in crop right now. It might be beans this year. The most interesting to me was the golf course in Howell, south of 96, off D19. A local farmer bought it, and has it planted. Kinda strange seeing corn grow on the fairways...I played golf there a couple of times, the golf course was put in the early 90's. I don't think it ever made money.