Tuesday, January 28, 2014

Chicago Fed's Beige Book Warning to Farmers: Plant Corn, Lose Money

According to some ag economists, at current prices it looks as if there could be losses of $150-200/acre.

This is a couple weeks old but very important to folks trading the commodities, speculating on implement and equipment companies (I'm looking at you, CAT), trying to get a handle on the global macro scene (plugging in food prices is a convenient first step) and on and on.
Plus it looks like Congress has a Farm Bill.
From the Farmgate blog:

The Latest Fed Beige Book Accurately Reflects Cornbelt Crops and Livestock

...Chicago:  Seventh Federal Reserve District

Corn and soybean prices moved a bit higher over the reporting period, but remained well below their levels of a year ago. Current prices for corn will not cover expected costs for 2014 production, whereas soybean prices would. This may lead to increased soybean planting in the spring....MORE
Where this can get really interesting is if farmers switch to beans thus shrinking the size of the corn crop but not enough to make corn profitable while at the same time creating enough of an oversupply in soybeans to also make them unprofitable in which case it might be time to short the United States in say six seven years à la the commodity price deflation of 1920-21 as precursor to 1929.