The below link discusses some worst case scenarios regarding the prices for corn and soybeans for the next couple crop seasons. I will state again this is a discussion of worst case scenarios and not what is the projected outcomes which can be low but also move higher, mostly due to weather issues. Weather issues create shortages which create higher prices but farm income many times stay low as the total crop harvested most times is lower.

The real warning or bleak aspect of the report is the continued projected modest prices or farm incomes which means creditors are going to be very cautious on loans. We have already had 3-4 years of lower returns and 2-3 or more of similar prices will eat up a lot of non land equity of the farmers.

Bryce

https://agfax.com/2019/08/14/corn-soybean-prices-a-worst-case-look-at-2020-2021/

it is depressing to look at the worst case scenario of the next two years. Especially when they cannot predict the future weather tomorrow let alone that far out. Does this take into consideration any new trade deals or anything that maybe a bright spot? Doubt it because no one can predict that either. LLL

The link won't work either. That is as bleak as I need. LLL

sounds like a disaster to me.. go ahead and trade the 2019 denali for a 2020

The trade issues are neutral at this time to slightly positive and probably will not hurt commodities near term if politically nation's leaders don't screw things up. The African swine flu is now being thought of as worse then anticipated and there will be a longer time before the Chinese will have a large swine herd to feed and thus less soybeans. Brazil and Argentina can sell beans at lower prices then we can. The Chinese would prefer to trade with us as we buy a whole lot more from the Chinese than does Brazil and South America and we are more stable as well. At this point in time Argentina and Brazil together can raise more beans then the US does and they are growing faster. When China has a decent soybean crop the World just does not need 8-9 billion bushels of beans and our prices are showing that. Also in the US lot of our very good soil just does not yield enough beans say 50-70 bushels per acre when those areas can raise 200-275 bushels of corn. There are a lot of regions in the world where a 30 bushel per acre bean yield may be a good yield and a profitable crop for those farmers in those areas.

Sorry the link is not working for some it is working for me.
Bryce

Thanks for the corn / soy futures update. I don't know enough about futures to say which direction prices are going to go but I do enjoy reading your posts, Bryce.

Big crops and lower prices is one thing, but lower yields (sometimes just a individual area ) and lower prices is quite another conundrum.

One thing I DON'T see in their scenarios is that China will likely buy pork from the US. Those pigs have to be fed somewhere . I don't see overall food demand for humans decreasing significantly.

Also, commodities are so low right now ..not just grains but copper & oil...........that this may be a good point to take a contrarian view.

Secondly, Deere just reported blowout profits for the last quarter. That would seem to indicate that farmers are fairly confident.

Bryce: what is your experience with farmers using the futures market to hedge their costs and production ? That seems like a no-brainer to me. I'm sure scale has a lot to do with that decision.

Was that Deere ag or Deere industrial? Or just Deere

Just Deere


https://finance.yahoo.com/news/deeres-unexpected-rise-quarterly-profits-162621134.html

People think of John Deere as a farm equipment company. But they make a lot of industrial and logging equipment. And lawn mowers.

One would think pork prices would be good but they are not at this time. Go to a meat market and you can buy pork steaks on special for $1.59 per lbs. or less while beef is way higher. One thing that happened is the swine industry really held back gilts a couple years ago expecting a big increase in pork exports to China but several things happened, Swine flu did not bring exports like planned, the Chinese economy is growing the slowest in decades, tariffs and trade wars and the Chinese own a huge part of the US hog processing industry, so many bet and so far have not gained. It will take some time to sort this out. Meanwhile as we cut back hogs here, prices will stay low and less soybeans will be fed.

As to farmers using the futures? In my area very few use CBOT futures as our farms are just not large enough to by buying and selling in the increments those markets run in, We have many that do buy local cash contracts with local mills. Many farmers here also don't like paying margin calls when prices go far enough away from ones contracts. I don't know the nation totals but in my area probably 20% or maybe less is contracted that is corn, beans or our soft red winter wheat. With some of the larger dairies expanding many farmers are selling alfalfa standing in the field and corn acres for silage and avoiding markets. Most sell beans and wheat for market but not much corn is dried and then stored when compared to other areas. As to large scale ILL, IA, MN, IN, NE cash grain farmers with thousands of acres I would say the contract or hedge more but I think we would all be surprised that it is not as much as one wanted. The crop insurance probably cuts into this some as farmers can pay a price per acre and establish an income base and not risk setting prices that could be too low. I know that is not a real professional answer but I am basing that mostly on my working with farmers I have worked with and know.


Bryce

Thanks Bryce. I can certainly understand that scale would be a contributing factor in the usefulness of futures. I had not given any thought at all to crop insurance. I'll bet you're right that this would have a huge impact on those decisions.

Brandt just bought Cdn industrial Deere dealership. Really big company.

https://www.brandt.ca/