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February 2013 Archive for From the Editor

RSS By: Brian Grete, Pro Farmer

Pro Farmer Editor Brian Grete takes time to talk with Pro Farmer Members about some of the key issues in each week's Pro Farmer newsletter.

Can yields really "fully" recover in 2013?

Feb 22, 2013

Chip Flory

From The Editor

Feb. 22, 2013

Hello Pro Farmer Members!

Pro Farmer Associate Editor Meghan Pedersen was in Washington D.C. this week for USDA's Ag Outlook Forum. She sat in on all the market outlook sessions and came away with a somewhat skeptical impression from some of the sessions because of the optimistic outlook towards 2013 yield potential.

I don't want to downplay the potential of a recovery in yields this year. It happened in Brazil... a drought-hammered crop in 2011-12 was replaced by really good yield potential for the 2012-13 growing season. But Brazil is different. Soils don't hold water like our do and rains are typically more predictable in the tropics than here in the Midwest. And even in a "normal" growing season, the U.S. Midwest typically has to tap into subsoil moisture to survive a week or two without doing damage to yield potential.

Simply put, Brazil's soil moisture is constantly being drained and replaced in a normal year. U.S. Midwest soils take more time to rebuild subsoil moisture... and that moisture typically remains available to crops for a longer period of time. Starting the season without adequate subsoil moisture is a concern. I know USDA Chief Economist Joe Glauber said something like, "There's no reason to not expect a yield recovery," but I disagree. Dry soils now simply lowers the availability of moisture for Midwest crops tap into later this summer. So... there is reason to not expect a yield recovery.

That doesn't mean yields won't recover... but it will take more than a "normal" or "average" growing season. Conditions will have to be excellent with spring rains (but not too much to delay planting), timely summer rains (don't make the crop work too hard to reach moisture) and maybe most importantly, temperatures will have to be more moderate than last year.

Unfortunately, above-normal temperatures throughout 2013's growing season is where weather forecasters agree the most. There's no guarantee temperatures will be hotter than normal this year, but most forecasters are warning another hot season lies ahead. That alone gives me reason to not expect a full yield recovery in 2013.

 

If you haven't checked out My Grain Trades on your homepage yet, please do that this weekend. This is an exceptionally valuable tool that will help simplify your marketing efforts in the year ahead. Click here to go to the introductory page. It's a free service for Pro Farmer Members that helps you keep track of your grain sales and figures your profit potential on the fly. Just check it out...

Pro Farmer's Marketing Education Series is also now available. It is what the title suggests... a series of workbooks designed to help you make better marketing decisions. Click on the link to learn more about this new project we're putting together.

That's it for now...

 

Follow me on Twitter at @ChipFlory

To join Pro Farmer, click here!

I wouldn't want to sell beans either!

Feb 12, 2013

Chip Flory

From The Editor

Feb. 12, 2013

Hello Pro Farmer Members!

Things are changing fairly quickly in the grain markets. The weather outlook for Argentina seems to be improving, as does the outlook for southern Brazil. Brazil's northern production areas are still soggy, but this week is a bit drier than originally expected, so some progress should be made.

The rain in Argentina, believe it or not, is too late for some of the crops. There will be some yield damage to corn and soybean yields, but it probably won't be as "bad" (or as "good") as the range of estimates for Argentine corn and soybean production suggest right now.

More importantly might be the financial situation in Argentina. Farmers just don't want to sell last year's crop, let alone this year's production. We mentioned in last week's Pro Farmer that an Argentine government official had commented they are considering "finding farmers that are hoarding grain" and forcing them to sell. Normally, the it's the market's responsibility to give growers incentive to sell, but the situation in Argentina is far from normal.

First... consider the 30% inflation rate. That means commodity values are rising, but the value of cash is falling. So as soon as farmers sell beans and turn them into cash, that cash starts losing value.

Second... the exchange rate. Argentine soybean farmers sell beans at the official exchange rate. At last check, that was about 4.5 pesos to the dollar. However, the black market is trading at about 7.5 pesos to the dollar. Trading anything at the official exchange rate nets Argentine farmers about 40% less than if they were trading dollars in the black market.

Third... the export tax. Beans leaving Argentina carry a 35% export tax... and exporters don't pay it. The export tax is taken straight off the price offered for soybeans.

When everything is said and done, Argentine farmers pocket only about 20% of the value of soybeans sold. I wouldn't be a very "willing seller" in that situation, either!

Next up will be a dockworkers strike. They say wages aren't keeping up with the rate of inflation... which I'm sure they're not. That's tough to do in a hyper-inflation economy.

 

If you haven't checked out My Grain Trades on your homepage yet, please do that this weekend. This is an exceptionally valuable tool that will help simplify your marketing efforts in the year ahead. Click here to go to the introductory page. It's a free service for Pro Farmer Members that helps you keep track of your grain sales and figures your profit potential on the fly. Just check it out...

Pro Farmer's Marketing Education Series is also now available. It is what the title suggests... a series of workbooks designed to help you make better marketing decisions. Click on the link to learn more about this new project we're putting together.

That's it for now...

 

Follow me on Twitter at @ChipFlory

To join Pro Farmer, click here!

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