$2 Corn 'Within the Realm of Possibility'

December 14, 2015 12:00 PM
$2 Corn 'Within the Realm of Possibility'

Corn and soybean producers with big on-farm grain inventories should be nervous about the potential for downside price risk, says Joe Vaclavik, Standard Grain.

“There’s no rule to say corn couldn’t have a $2 in front of it,” Vaclavik tells “AgDay” host Clinton Griffiths. “That doesn’t mean I’m bearish the market, it doesn’t mean I’m projecting that. It just means that it’s certainly within the realm of possibility when you look at the macroeconomic environment, when you look at the demand. South America’s in good shape. There’s no rules in this thing. When you get in these bear markets, the tendency is to want to pick a bottom. Maybe we’ve seen it, but maybe we haven’t.”

To manage risk more closely, producers should look at marketing tools that can help.

“Options are a great tool to carry you into spring and summer,” Vaclavik says. “They’re affordable right now relative to what they’ve been the last year just to … give the farmer some peace of mind.”

The bottom line is that a plethora of unknowns leave the potential for a deeper price bottom than some might have expected previously.

“There’s no rule that says the dollar couldn’t shoot up above 100 and go to 105 or 110,” Vaclavik says. “There’s no rule that says our exports couldn’t deteriorate further. I’m really nervous about what’s going on here on the farm. I think everybody’s really got all their eggs in one basket betting on higher prices. When I say everybody, I mean the farmer in general. Sure there are guys that have done their homework and have the risk management in place, but as a whole this thing really makes me nervous.”

Click the play button below to watch the complete interview with Vaclavik, including recommendations for planning 2016 crops in light of price uncertainty.

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Spell Check

Ivanhoe , MN
12/15/2015 11:46 PM

  We quickly forget how we used crop insurance to get at $250 rent and now Brazil is killing us farming. We got rich now we have to pay it back. Should let free market S work. Construction guys don't get revenue protection. Our bad!

Dave Burke
Smithfield, PA
12/15/2015 09:24 AM

  Don't plant what you can not sell, at a profit. Too many plant from one road to the next. This is not a new thing going on. Same old boom and bust cycle. Guess who never loses, ---the ones processing the finished garbage.

lake city, MN
12/14/2015 11:56 PM

  Saw this coming three years ago. Went through the 80's and some tough times since. 2012 was the first time cropping was fun for us. Great crop, avg. over $7.50 corn and $16.00 beans all forward contracted. Have beef cattle as well. Beef price was good then, but when plugged in feed costs, were a loss. 2013 came to prevent plant. Sprayed all acres to keep weeds down and no tilled cover crops to maintain land and took some off for feed late fall. No profit there, even at 85% coverage. Little to no profit on crops in 2014 but cattle pulled it through. Didn't even look forward to corn and beans in 2015 but have to plant something. Big loser. Cattle prices have tanked much quicker than anticipated. Hard decision but future does not look bright. Not running the land next year and selling a stellar cow herd way down. I'm 51 yrs. old and sick of fighting the battle. Farm economy across the board for various reasons has been too good for too long historically. Dummies that drove up land and rent prices helped destroy this thing for those of us who had a grip on reality. Going to take a bit to get things back to reality. I for one am not willing to loose money until it all shakes out. Next spring should be interesting. How many may not get refinanced? How bad can it get? Worse times yet to come I believe. Not trying to be a downer Debbie, just realistic. Lived through the 80's with my dad and the cattle market and high interest. Went from pretty well off to deep in debt in a short time. Not going down that road at my age. If someone else thinks they can make money at these prices, let them try. I'm taking the safe road as I don't believe we've seen the worst of this yet. Actually think the next couple of years could get really ugly for the ag industry. Put it this way folks, if you had money to put in an investment and you look at agriculture right now versus putting it some where safer, where would you invest? Took many sleepless nights to decide the best for my family.


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