Grain markets are "like the slow drip of a leaky faucet that no one can fix."

[helmsdale]

Zerohedge dumped an article onto my twitter this morning as I was perusing the typically shitty state of the world while drinking my coffee.

[URL="http://www.zerohedge.com/news/2017-12-15/one-trader-reflects-bad-trade-never-ending-grain-pain-and-whose-fault-it-was"]http://www.zerohedge.com/news/2017-12-15/one-trader-reflects-bad-trade-never-ending-grain-pain-and-whose-fault-it-was[/URL]

ZH is referred to by many as Doom Porn, but seldom have i disagreed with what the various Tylers have been writing about at any given time.

The associated pictures paint a brutal picture of which many have been lamenting about on here for the last little while. The last 5 years of wheat, and the 50 year charts on wheat, corn, and soy discounted for inflation.









Now the thing that these are likely missing even though they are discounted for inflation, is that they are not discounted against real inflation. They are likely discounted against CPI, which is chronically low for the general public, let alone our inputs, or the value of land and equipment.

The fundamentals look terrible. As he argues, new equipment pricing has gone full parabolic, land prices and rents have skyrocketed with cheap credit, and nearly every input continues to jump higher. Couple this to the previous charts, especially the 5 year front month chart for wheat and there's no question which way margins have to go if the cost structure doesn't follow suit.

Those whose fortunes depend on crunching the fundamentals are starting to realize the scope of the situation... See this dtn article on farm lenders gearing up for difficult discussions with growers.
[URL="https://www.dtnpf.com/agriculture/web/ag/news/article/2017/11/20/bankers-gearing-difficult?referrer=twitter#.WhLWFmNMPIE.twitter&DC MP=Todd"]https://www.dtnpf.com/agriculture/web/ag/news/article/2017/11/20/bankers-gearing-difficult?referrer=twitter#.WhLWFmNMPIE.twitter&DC MP=Todd[/URL]
Or the recent cashing out by Macdon, and potentially AGT, and others.

Quite a change from a few short years ago when we were told at every opportunity that AG had nowhere to go but up UP and UP! The population was growing, the middle class world wide was burgeoning, and there was NO MORE LAND being made. Seems just like the peak oil hypothesis, we proved em tragically wrong over the short run yet again.

[errolanderson]

This is just part of global commodity deflationary pressures (IMO). And a 'day-of-reckoning' awaits for the artificially-induced central bank asset bubbles. 2018 markets may be interesting . . . .

[tweety]

Weren't 2017 markets supposed to be a disaster too?

[fjlip]

If the charts start at 1970, that is why I thought farming would be a great career, downhill ever since!
The most profitable in 70's and we didn't know it then. The GOOD OLD DAYS!

[wmoebis]

Like to see sme graph on input coats.

[farmaholic]

Come on Ladies and Gentlemen.

......Tis the season to be jolly.....fa la la la la ...la la la la

[checking]

Everyone is playing - paying year end heavy metal, and farmaholic has X-mas tunes on his mind. That's a reverse!!!

[farmaholic]

Everyone is playing - paying year end heavy metal, and farmaholic has X-mas tunes on his mind. That's a reverse!!!

Lol.....filled meds prescriptions. Just kidding, I'm drunk.

[Partners]

Don't even check the markets.
All grain company's being scrooge at this time of the yr.

[errolanderson]

The question now may be; how does this artificial boom end? The economy has been stopped from refreshing itself naturally for the past ten years via central bank manipulation. But central bankers are now losing power and influence (IMO). How realistic do stock markets appear right now? Historic highs nearly daily.

Economic growth is only averaging 2.5 percent at-best realistically, there is no wage growth, there is no inflation to speak of. What commodity market acts like the stock market?

Realize, I’m stirring the pot, but in my near 40 year career involved with trading commodities, I have never witnessed such unusual market action.

[farmaholic]

I do think there is some retail inflation.... anything that is packaged is being packed into smaller quantities and costing more.....the package may cost a bit less but what ever unit price they're selling it for is higher! And anything that can't be "repackaged" is simply costing more per unit. I'm talking everyday consumer goods. Just take note sometime. Not real big ticket items. But I don't track this professionally so WTH do I know.

But I don't think anyone is arguing this point..... the topic is commodity deflation. What do you mean there could be an adjustment..... Like in 2008 and after that land prices went full retard? Geez just what farmers need...an extension to the parabolic rise in land prices. Ya ya ya,,,, there he is whining again about land being too expensive.... well let me tell you, no young farmers here can afford to buy it!

[helmsdale]

Errol,

Regardless of the market, no one seems to give a damn about fundamentals anymore. Capital no longer seeks long term return which relies upon fundamentals. It's all about the short term.

[farmaholic]

Thread title: Grain markets are "like the slow drip of a leaky faucet that no one can fix."

Solution: Turn off the supply.....the drip will stop.

[errolanderson]

Thread title: Grain markets are "like the slow drip of a leaky faucet that no one can fix."

Solution: Turn off the supply.....the drip will stop.

Turning off the supply in a deflationary global market won't work well (IMO).

Demand is king, not supply. Markets quickly find their way around supply issues and now at discounted prices.

What we were taught in economics school is having trouble standing up in this strained debt-ridden global environment.

[crusher]

Perhaps mother nature will adjust the supply situation.