Apr 20, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin


October 2011 Archive for Outlook Today

RSS By: Bob Utterback, Farm Journal

Bob Utterback has more than 26 years of experience and offers producers a disciplined approach to marketing.

Boom-and-Bust Economic Cycle Looms

Oct 24, 2011

Why is there so much gloom and doom in the grain marketplace?

 
In two words, it’s the outside markets. The continued debt crisis in Europe, anemic job growth in U.S. and the resulting slowdown in China has many worried about future demand. Essentially, we are entering the dark side of the boom-and-bust economic cycle.
 
We are now in a down­ward spiral of slow economic growth, along with high private and governmental debt expo­sure that saps consumer and government disposable spend­ing, resulting in slow job growth that leads to less tax revenue.
 
Talk of a double-dip recession is giving way to concern that we could actually be looking at something much worse—the big “D.” The end result is fear, which is becom­ing a force in the market whose effects are difficult to predict.
 
Subsequently, we are now in a time period when the supply and funda­mentals for corn and soybeans are still important but will indicate only about 40% of the price direction.
 
I’m inclined to believe that for the next six months, the pink elephant in the corner will be the direction of the outside mar­kets. If the Dow makes new lows, the funds and professional speculators will be forced to move aggressively to the sidelines.
 
As a result, at least in the short term, it could be extremely painful for a net long. Long-term, we should get values down to levels where demand will be stimulated and production discouraged at a time when we actu­ally need the opposite.
 
The upshot is that the lower the market goes in the next three months, the more likely the chance that demand will stabilize and then increase while supply is still tight, leading to a dangerous upside price event.
 
 

 

BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2011.

The Fundamental Elements of Marketing

Oct 07, 2011

Let me remind you of some basic elements about agriculture marketing that I’ve come to believe are bedrock assumptions when it comes to understanding long-term price patterns:

1. The best cure for high prices is high prices. When prices get too high, they destroy demand and stimulate production both domestically and internationally.

2. Short crops have long tails. This means we normally see a high price early on confirmation of a supply reduction, which leads to demand rationing and a subsequent increase in production during the next production year.

3. Bulls and bears always get fed, but hogs get slaughtered. If you don’t understand this, you might as well get out of the market.

4. The rule of unintended consequences. The market often reacts in an unexpected way that surprises us. Many times, it acts in a way that disappoints the maximum number of people. In this case, producers will be putting cash corn and soybeans in the bin with no carry in the hope of seeing sharply higher prices the following summer.

While these principles are well known, we seem to want more complex answers to the basic supply-and-demand equation. I believe commodities are produced in an economic structure that will not allow excessive profits to be realized for more than two marketing seasons. While this has been proven to be a little incorrect because of ethanol and the China growth function in the corn market, I believe it will eventually be vindicated.

 

BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2011.

Log In or Sign Up to comment

COMMENTS

Receive the latest news, information and commentary customized for you. Sign up to receive Dairy Today's eUpdate today!

 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions