Some time ago I did what I thought was an example of COP for 2022 corn budget
Some pointed out that most farmers have some equity and thus some land and machinery paid for thus their cost for land and machinery is lower than my estimate
My own family said if they could not survive given their equity then a whole lot of farmers are in trouble, as with paid for assets one's COP is much lower than my estimate
True in a way. Paid for land or low payments lets you skip the opportunity cost and take what you can get for your land
Machinery is different. You can skip some yrs and not buy any thing, but machinery does wear out. At some time you have to come up with the money to trade a piece of equipment and then sticker shock sets in. The same as you looking for a car, except the cheapest model won't do the job, so you are forced into buying the same as you had
However, one thing has changed and may stay changed
Any thing made from NG or oil. That includes most fertilizers, especially Nitrogen, most chemicals
I have no idea if availability may be a problem and cost will likely be more
If the market in Jan-Feb shows no sign of offering COP for 2022 corn production, what might happen
I got to thinking if higher cost starts to sink in come next winter, will there be a huge shift to soybean acres???
If so what is a fair price for corn on most farms
I would think nobody knows but I bet it is more than today's price
$10/bushel................now every producer loves me (-:
Actually, I don't know, except to say with high confidence that producers will say higher prices than people in other professions will say...........like its always been.
Nothing personal either. I have alot of farmer friends but have never heard one of them say anything bad about corn ethanol or that corn prices were too high.
What is a "fair price" for anything, is a matter of both perspective and need. Since your price is basically set by market value, which is set by supply and demand, then you have an idea of what you can make in the future. Yet not in control of it as is a factory, et.al. But you already know this.
Projecting future COP is an endeavor. Always necessary. And the only way farmers can make an impact in prices, is to choose to produce, or not produce. If you rent out your land, you make some profit, even if the renter doesn't. But the renter will still be putting product into the supply, even at a loss. So the price still stays down.
good points Mark. Guess this is like trying to decide if athletes or actors are overpaid. Is corn worth 5 bucks? Its what the market will bare. Seems farmers usually squeeze enough yield out to compensate for higher prices of inputs but now we come to a crossroads of needing 5 bucks because that is near breakeven. Been paying rent on ground for decades and not once has it ever...ever...went down only up for example.
One thing we are not used to happening is absolutely nothing available when you want it
We had a major bearing failure on a brand new combine after 15 hrs of use. Come to find out the bearing was installed at the factory with zero grease. Some body f^^^^ d up.
By the time we found out we had a failed bearing the only bearing the Co could find was to rob a bearing off a new combine sitting 6-10 hrs away. I don't know where it came from as the bearing was shipped part way and then picked up and delivered to our farm Needless to say we did not get much done that day
But: What would we have done if some body else had the same problem, before we did as a bunch of combines, all came off the line with a faulty bearing, and going all over the world.. These combines were made in Belgium and all arrived after wheat harvest. We started harvest early as we had to deliver on some early contracts. So now the Co. has sent out an alert to fill that bearing with grease. I just hope everybody got the message or some body will have a brand new combine which needs a new bearing of which there are no more to be had until ???
Most bearings are some what common and several suppliers can access bearings but this one must be special if they had to rob a bearing from a new combine instead of going to a supplier of bearings
What if you plant x acres of corn but the nitrogen is all used up, when you need it. Some are buying and storing inputs before planting, but some body could get caught. The U. L seems to have a worse problem than we do. What about farmers in poor countries that can not afford to carry inventory for several months
We have storage tanks for part off our needs and will add next yr. so we will join the ranks of those who store inventory
Until supply chains get unravelled and production goes back to normal we will have a whole new world of problems to deal with,
Just wait until your refrigerator fails on a Sunday morning
We have a new stove on back order with no idea when it will come. At least 3 of 4 burners still work
This supply chain may last for 10 yrs as I predicted in another post. My reasoning is that nothings, so far is making any thing better
My wife is reporting some of the same issues on certain parts and my son's Toyota plant in Princeton IN had to shut down for several days because they ran out of parts.
Wayne, down here its already begin. We have delivery and supply problems in round-up, ams, potash, phosphate, nitrogen right down to toilet paper. Along with this mess on the boarder etc. Prices on the rise foe every farm input to the tune of 75 to 100 bucks an acre...if available. All this mess could of been seen by a blind person but not anyone on the Biden team. Strange they support most anything bad for this country including a new Russian on his staff.
Well folks: Get ready for a new inflation shock
Lets assume there is only a limited supply of what ever you need or want to buy. What would you pay for TP if you knew the next shipment was four weeks away. Some would wait, some would pay what ever the asking price. Do you agree??
We have a post on farm inputs but most of you are not directly affected by farm inputs
But we do have some thing that will affect most of you folks. We have a new stove top and oven on order. No idea when it will arrive but the sales clerk did give us a price and asked to pay up front
Now the next appliance may be months coming to that store
Why? Because china has a problem. They need energy to survive the winter. They also need energy to supply the appliance manufacturing factory. It could be any thing we import from china but let's stick to appliances
China has to make a decision. Energy to heat their homes or keep the factories going. at least until the stock pile is full which could take some time.
Why did this happen. Partly because of a political battle with Australia coal and partly because the normal supply of coal from Mongolia is not coming due to Covid problems and enough workers. So the supply of coal dwindled to almost nothing and at the same time NG and oil price went thru the roof along with coal price. So the buyers of energy were told to stock pile at any price. Resulting in the price explosion you all know about. NG is priced at approx 200.00 plus a barrel of oil
So: Here is where we get affected. The appliance factory is on a strict ration of energy. Reason being that social unrest is to be avoided and the people need heat or energy. Factories are told to supply the domestic market 1st
So the supply of appliances we get shipped our way is less. Much less and this is just appliances. Every thing is less and you guessed it much more expensive
So china's problem about inflation becomes our problem. You can see it coming. Soon people will buy essentials only but some have the money to buy high priced stuff such as appliances, I Phones etc. Price is no problem but golly that sure does affect inflation for us and most of the West. Try to find petrol in the U.K.. What happens if B.P, Shell etc were and are all discouraged from new production because of the Biden administration discouraging investment in fossil fuels. Did you know the number of rigs active in the Gulf of Mexico has dwindled after Biden decided green energy was the choice and actively discouraged new drilling permits. So: How secure do you think our energy supply may be. It will take a while longer as we have supplies of coal but Biden does not like coal so what happens?? I sure don't know. He killed the pipeline you needed for our oil
However, it is starting to look as if we need to start to build stuff in NA. Would you not agree inflation will only get worse what with supply chains messed up as reported in the above post or things we want. Soon it won't be wants that only a few can afford. The wants part of the equation will dwindle as the essentials take more importance, Also, as inflation and the purchasing power of our fiat lose ground rapidly. We are sort of boxed in with no way out, as it is today.
All of this will cause more inflation in the west, would you not agree??
Did you know that Canada and the USA have a common ware house. That ware house is what is in the trucks rolling down the highway, on it's way to a town or city near you and then either going on the assembly line or broken down into smaller parts for delivery to a McDonalds or maybe Costco receives the entire truck load. We have an inventory problem if the truck breaks down or the driver retires and nobody takes his/her spot on the high way
We are at risk from Chinese inflation and supply bottle necks
Does that give you a lot of confidence this administration knows what is needed to avoid just two senerios I mentioned, while they decide how many trillions to spend on roads and bridges and green. Yes we need an infastructure but don't you think some body should look at little farther into what could happen
What do you think. I may not see the entire picture and I would like your input
Huge/wonderful topic Wayne!
To me, this just confirms that we are many decades away from being able to survive without being very dependent on fossil fuels.
One side has been selling us all these fake green fairy tales that were always laughable when applied to the real world for anybody that understands the energy business and realities.
But the politics were allowed to control and make really, really dumb decisions.
This is a good wake up call though...........hopefully.
There is MUCH more to this than just trying to go with the fake green energy, however...lots of people looking at the dynamics right now and going........."gee whiz, I guess 2+ 2 doesn't equal 10 with fake green energy like they promised.
BTW, I am for alternative energy that makes sense.
Beijing’s green ambitions, policy confusion and supply disruptions blamed for shortfall
Workers ordered to take the stairs, manufacturers forced to cut production drastically in the lead up to Christmas and households left for days without power. China’s electricity crunch has alarmed authorities and panicked businesses. Marking the seriousness of the crisis, China’s cabinet, the state council, said on Friday it would allow power prices to rise by as much as 20 per cent to incentivise power production, a jump from the current 10 per cent limit. Beijing has also ordered coal miners to expand production dramatically, raising doubts about China’s promises to transition to green energy and achieve peak carbon emissions by 2030.
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What caused the shortages? Although coal-fired power still accounts for about 70 per cent of China’s electricity, there has been a lack of investment in the fuel. Beijing has been slowly closing coal mines and power plants for years for both environmental and safety reasons but recently there have been other disruptions too. The majority of the nation’s domestic supply comes from Shanxi and Shaanxi provinces, and Inner Mongolia. An anti-corruption campaign in the coal industry in Inner Mongolia has disrupted supplies since last year, while mines were closed to allow the sky to clear for events such as the Communist party’s 100th anniversary and September’s national games, China’s mini Olympics, in Shaanxi. Buildings at the closed Muchengjian coal mine in Mentougou, west of Beijing, China
I will tell you what we may survive and that is this dunce laden administration. Just today the question was ask about inflation. And psaki actually said Biden just does not see it affecting things much....well other than eating, driving, buying anything, surviving...right psaki and Biden. And Mm touched on this briefly. It means only one thing. The absolute venom that libs have for American means they care not one twit about real pain. They want a make over and do not care who gets hurt. That has been and is their plan.
On a side note tell me just how many Presidents we have had since WW II that have actually created a job or made a pay roll?????
yes, I would put it there where it belongs but I do not see I can move it. I thought you were the only one to do this.
Also will offer the latest on the huge amount of freight setting off shore and cannot be moved because Biden and company took their jobs. But glady told he created 5 million jobs for thr people he fired. And psaki said don't worry bout the freight, we have been "talking" about this problem since Jan...damn we should all feel better.
This is totally an NTR post.
Would you mind writing the comments down there for us please?
OK, I can see that would be confusing since there isn't an NTR thread for you to place it under unless you start a new thread.............so please, as many posters here have requested, that do NOT want politics in their trading forum refrain from making political posts up here.