DM&E Expansion and the farm economy

[Datafever]

I wouldn't be able to get away with it if I was working, but since I'm not I've started walking a lot of errands instead of driving them, anything within the range of 15-20 blocks round trip, I'll walk it.

All right, AG!  I am an avid walker myself, using only public transportation to supplement my own two feet. 

[Anonymous]

 

I was speaking of "feed surcharges" as the funny bit.  

 

(I am overweight, so before anyone here trys to construe the following as a cheap attempt to laugh at the misfortunate, I'm as much on the "inside" of this one as anybody)

 

The humor I see is the conflict. We have a society that by and large enjoys eating itself obese ,  food often seen as fun, and the more the merrier, as well as a society that seems addicted to driving. People will jump in their cars and drive if their destination is further than the end of the street, and so often that trip includes a stop at Taco bell enroute.

 

So, I see a certain amount of poetic justice in having the panging for travel jacking up the cost of eats.

 

Choices choices, etc?  where to sink that last fiver, etc.  

I wouldn't be able to get away with it if I was working, but since I'm not I've started walking a lot of errands instead of driving them, anything within the range of 15-20 blocks round trip, I'll walk it.

 

My friends all think I'm crazy, ask if the car must be broken down, etc.  I guess that's just because they can't envision any set of circumstances where they would walk more than a block.

 Gas prices weren't even the motivator when I started the affection for walking,  (gas was only around $2/gallon when I started)...rather a pledge to start trying to enjoy the journey as well as the destination,  was.

 

So when gas later started hitting $3/gallon,  I was already  to the point I was only buying a tank of gas every other month, and could take it in stride.

 The psyche we have sold ourselves on, that we need a car to rush us everywhere, is unhealthy thinking, in my book. 

 

[jeaton]

So I don't think we're messing too much with the food supply at this point.  It is interesting the way America's addiction to oil is on a collision course with the farm price/subsidy structure in our economy.

Well, I'll bet the cattle farmers waste no time passing this added cost along to the consumer.

SO, I suspect there may be some relationship, very soon.

There's no way for cattle farmers to pass along the added cost (more on that in a minute).  When you sell cows you take what the buyers offer, unless you have some kind of deal with a restaurant or butcher to sell direct to them, and I imagine those deals are keyed to cattle futures prices.  Another alternative is to be an integrated producer who sells to grocery stores or direct to the public, but those are very, very rare (at least to my knowledge).  Farmers just don't have enough control of the market to pass along increased prices; their only option when a crop becomes unprofitable is to quit that crop and produce something else. 

Trust me, if corn prices get high enough this country will be awash in corn the next harvest season.  There is enough farmland that is unused or used to grow something else that isn't very profitable, that if corn suddenly becomes profitable a lot more of it will be planted.  Where I grew up people are planting good farmland to pine trees because the trees don't require the inputs (labor, equipment, fuel, etc.) that crops do - it's just a way to lose less every year.

Interesting article on ethanol and corn prices by a reporter for the Janesville (WI) Gazette with information from the AP:

http://www.gazetteextra.com/ethanol120206.asp

The reporter quotes Chris Hurt, Purdue University agricultural economist who suggests that US 2007 corn planting could increase by 10 million acres to a total of 89 million acres.  Will that be enough to supply the forecasted increased demand for corn?  See my second signature quote and stay tuned.

Jay

 

[Murphy Siding]

      The goal, all along for ethanol proponents has been to raise the price of grain.

[jeaton]

Guys!  Remember? Livestock prices are made in very active markets.  You know-supply and demand stuff.  There are no "feed surcharges" added to livestock prices and the passing it along comment would have them falling on the floor. 

 

I'm going to have to start sticking to my guns more tenaciously.

 

I was offering that I believed that higher grain(corn) prices would result in more costly meat for the table, and lo and behold, http://money.cnn.com/popups/2006/pf/costsupdown/2.html

 

I guess if those very active markets are all forced to bid on the same availabilities, and those availabilities are all affected by the surge in grain prices,  then Homer is back in the position of having to decide if that last fin in his pocket goes for a burger for his gut, or a splash of fuel for his ride.

 

Decisions decisions!!  time to sweep that floor.

 

 

I was speaking of "feed surcharges" as the funny bit.  

As the food buyer in our house, I have no doubt that increased grain costs effect the cost of beef and other meats.   It is just a matter of the cost working its way into the market price of the cattle.  Sometimes a rise in grain cost will actually cause a short term decline meat prices as the feed lot operators may send a greater than usual number of cattle to markets rather than pay the higher price for feed.  That bulge in the supply will work off rather fast, and results in a subsequent lower supply and a corresponding increase in price.

And yes, sometimes it's pasta instead of meatloaf.

[Anonymous]

Guys!  Remember? Livestock prices are made in very active markets.  You know-supply and demand stuff.  There are no "feed surcharges" added to livestock prices and the passing it along comment would have them falling on the floor. 

 

I'm going to have to start sticking to my guns more tenaciously.

 

I was offering that I believed that higher grain(corn) prices would result in more costly meat for the table, and lo and behold, http://money.cnn.com/popups/2006/pf/costsupdown/2.html

 

I guess if those very active markets are all forced to bid on the same availabilities, and those availabilities are all affected by the surge in grain prices,  then Homer is back in the position of having to decide if that last fin in his pocket goes for a burger for his gut, or a splash of fuel for his ride.

 

Decisions decisions!!  time to sweep that floor.

 

 

[solzrules]

Murph-

Will yesterday's election make any difference to the DME bid, either through the Federal or State politicians elected in South Dakota ? 

Politics()  Can you believe, that some of our radio stations are actually playing music today, over the airwaves??

    My own personal belief, is that it won't change anything too much, as I've come to believe that not much changes, no matter who gets elected to what.  We elect people who promise things that both they, and we know they can't deliver.  Then we complain that nothing gets done.  We have the politiccal system we deserve.  ( That's about as political as I want to get on a train forum)

 

     I haven't heard how Brookings, S.D. came out on their election to over-rule the agreement between DM&E and the City of Brookings.

Don't be too sure, there, Murph.  The new congress will have a different set of people with different priorities.  If the wrong people side up with the Mayo, there will be enough political clout to bring the whole thing to a halt.  Another ten years of studies and legal filings could do it.  This whole project was basically a pet of John Thune, and there is nothing saying that someone else couldn't make it their pet project to kill it. 

The sad part is that if it is killed many states will miss out on an enormous amount of economic opportunity. 

[Murphy Siding]

Brookings said no. http://www.keloland.com/NewsDetail6162.cfm?ID=0,52276

     Thanks.  I tried finding something at lunchtime, with no luck.

[mheilmann]

Brookings said no. http://www.keloland.com/NewsDetail6162.cfm?ID=0,52276

[Anonymous]

Actually, our infatuation with driving is making everything more expensive already.

Ohh god, sounds like a commercial for commuter rail in the making.

[Murphy Siding]

Murph-

Will yesterday's election make any difference to the DME bid, either through the Federal or State politicians elected in South Dakota ? 

Politics()  Can you believe, that some of our radio stations are actually playing music today, over the airwaves??

    My own personal belief, is that it won't change anything too much, as I've come to believe that not much changes, no matter who gets elected to what.  We elect people who promise things that both they, and we know they can't deliver.  Then we complain that nothing gets done.  We have the politiccal system we deserve.  ( That's about as political as I want to get on a train forum)

 

     I haven't heard how Brookings, S.D. came out on their election to over-rule the agreement between DM&E and the City of Brookings.

[Murphy Siding]

So I don't think we're messing too much with the food supply at this point.  It is interesting the way America's addiction to oil is on a collision course with the farm price/subsidy structure in our economy.

Well, I'll bet the cattle farmers waste no time passing this added cost along to the consumer.

SO, I suspect there may be some relationship, very soon.

There's no way for cattle farmers to pass along the added cost (more on that in a minute).  When you sell cows you take what the buyers offer, unless you have some kind of deal with a restaurant or butcher to sell direct to them, and I imagine those deals are keyed to cattle futures prices.  Another alternative is to be an integrated producer who sells to grocery stores or direct to the public, but those are very, very rare (at least to my knowledge).  Farmers just don't have enough control of the market to pass along increased prices; their only option when a crop becomes unprofitable is to quit that crop and produce something else. 

Trust me, if corn prices get high enough this country will be awash in corn the next harvest season.  There is enough farmland that is unused or used to grow something else that isn't very profitable, that if corn suddenly becomes profitable a lot more of it will be planted.  Where I grew up people are planting good farmland to pine trees because the trees don't require the inputs (labor, equipment, fuel, etc.) that crops do - it's just a way to lose less every year.

     JOdom: You're right .  I phrased that incorrectly.  Of course, the price a farmer gets for his product is dependant on the market selling price, not on his cost.  My mistake.  I do, in the long run, see the price of farm products rising, as the cost to do business increases.

[nanaimo73]

Murph-

Will yesterday's election make any difference to the DME bid, either through the Federal or State politicians elected in South Dakota ? 

[SALfan]

So I don't think we're messing too much with the food supply at this point.  It is interesting the way America's addiction to oil is on a collision course with the farm price/subsidy structure in our economy.

Well, I'll bet the cattle farmers waste no time passing this added cost along to the consumer.

SO, I suspect there may be some relationship, very soon.

There's no way for cattle farmers to pass along the added cost (more on that in a minute).  When you sell cows you take what the buyers offer, unless you have some kind of deal with a restaurant or butcher to sell direct to them, and I imagine those deals are keyed to cattle futures prices.  Another alternative is to be an integrated producer who sells to grocery stores or direct to the public, but those are very, very rare (at least to my knowledge).  Farmers just don't have enough control of the market to pass along increased prices; their only option when a crop becomes unprofitable is to quit that crop and produce something else. 

Trust me, if corn prices get high enough this country will be awash in corn the next harvest season.  There is enough farmland that is unused or used to grow something else that isn't very profitable, that if corn suddenly becomes profitable a lot more of it will be planted.  Where I grew up people are planting good farmland to pine trees because the trees don't require the inputs (labor, equipment, fuel, etc.) that crops do - it's just a way to lose less every year.

[Murphy Siding]

     OK, I see what you're saying.  I don't think there will problems with supply, per say.  It's the prices and/or subsidization of the prices that I see causing some excitement.

Now that you mention it, I guess I could have been more clear.

No,I don't forsee famine as a result.

I'm just thinking that our infatuation with driving is about to start making eating more expensive.

I guess the heavy drivers can always settle for range fed beef?

Actually, our infatuation with driving is making everything more expensive already.

[SALfan]

What are corn prices right now?  The last I read about them, farmers were still praying for $3 per bushel . . . the same price they were praying for in the early 1970's.  Don't get me wrong, I hope prices go up enough for farmers to make some money, but will believe it when I see it.  I don't know of anything else that costs the exact same amount it did 30 years ago.

Commodities prices

Of course, I'm sure that assumes a certain minimum  quantity.

Thanks for the info.  Don't mind saying I'm shocked and amazed, but it's great to know that corn prices are up somewhat.  Hope the farmer is getting most of that.

[Anonymous]

     OK, I see what you're saying.  I don't think there will problems with supply, per say.  It's the prices and/or subsidization of the prices that I see causing some excitement.

Now that you mention it, I guess I could have been more clear.

No,I don't forsee famine as a result.

I'm just thinking that our infatuation with driving is about to start making eating more expensive.

I guess the heavy drivers can always settle for range fed beef?

[Murphy Siding]

     I'm not sure they have another option.

Ohhh, silly me.
 When you wrote earlier :" So I don't think we're messing too much with the food supply at this point"  I took that to mean you were saying  impact was unlikely.

     OK, I see what you're saying.  I don't think there will problems with supply, per say.  Before, the grain was going to the cows.  Now, just the mash goes to the cows.  As the price of corn goes up, due to demand by ethanol plants, more farmers will plant corn to fill that need. It doesn't divert any more grain from human mouths to animal mouths than it did before.I believe there will be some excitement in the area of state ethanol production subsidization in the near future.

[jeaton]

Guys!  Remember? Livestock prices are made in very active markets.  You know-supply and demand stuff.  There are no "feed surcharges" added to livestock prices and the passing it along comment would have them falling on the floor. 

[Anonymous]

     I'm not sure they have another option.

Ohhh, silly me.
 When you wrote earlier :" So I don't think we're messing too much with the food supply at this point"  I took that to mean you were saying  impact was unlikely.

[Murphy Siding]

So I don't think we're messing too much with the food supply at this point.  It is interesting the way America's addiction to oil is on a collision course with the farm price/subsidy structure in our economy.

Well, I'll bet the cattle farmers waste no time passing this added cost along to the consumer.

     I'm not sure they have another option.

[Anonymous]

So I don't think we're messing too much with the food supply at this point.  It is interesting the way America's addiction to oil is on a collision course with the farm price/subsidy structure in our economy.

Well, I'll bet the cattle farmers waste no time passing this added cost along to the consumer.

SO, I suspect there may be some relationship, very soon.

I wish I could recall the specifics better, but a childhood friend had bought a derelict  120 acre farm for cheap, years ago.  He was using some "don't plant" subsidy to in effect make his mortgage payment, and he was working to pay his other living expenses. When his neighbor called it quits a few years ago, my friend bought his farm (80 more acres) and used the same subsidy to pay for that land.

I recall in 2002, my friend was saying that the subsidy program had expired for him, that he was thinking about renting the land to someone who actually wanted to grow crops.

My bet is, my buddy is about to start growing corn.

[Murphy Siding]

Interesting now the way America's addiction to oil is on a collision course with the food supply.  Be interesting to see which choices are made.

     In the past, a lot of corn was grown and fed to livestock.  The corn that is used for ethanol produces a *mash* bi-product, that is fed to ... .....livestock.  So I don't think we're messing too much with the food supply at this point.  It is interesting the way America's addiction to oil is on a collision course with the farm price/subsidy structure in our economy.

[Datafever]

What are corn prices right now?  The last I read about them, farmers were still praying for $3 per bushel . . . the same price they were praying for in the early 1970's.  Don't get me wrong, I hope prices go up enough for farmers to make some money, but will believe it when I see it.  I don't know of anything else that costs the exact same amount it did 30 years ago.

Commodities prices

Of course, I'm sure that assumes a certain minimum  quantity.

The current price of $3.50 a bushel is the result of a huge runup over the past couple of months.  Back in the spring of '04 the price managed to reach $3.20 a bushel, but the price generally has hovered between $2.00 and $2.50 a bushel over the past five years.  The commodities price is for #2 Yellow, 5000 bushels per contract.

[Anonymous]

What are corn prices right now?  The last I read about them, farmers were still praying for $3 per bushel . . . the same price they were praying for in the early 1970's.  Don't get me wrong, I hope prices go up enough for farmers to make some money, but will believe it when I see it.  I don't know of anything else that costs the exact same amount it did 30 years ago.

Commodities prices

Of course, I'm sure that assumes a certain minimum  quantity.

[Anonymous]

Several points:

1.  My brother in law is just finishing up about 1500 acres, majority of it is corn.  He indicated there has been a recent run up in corn the last month, which occured after the meltdown in natural gas which lead to the big Hedge Fund shutting down because of natural gas losses.  He said that there was speculation in corn as the traders had to do something with their money.  I sorta discounted what he said at the time, but the more I think about it...sorta makes sense.

ed
4. 

Thanks for the additional info...the Co-op guy at the elevator was talking about the "hedgefund" involvement as well,  so there probably is a strong likelihood there. I was just too bummed out at the time at having to pay $4/sack for corn to press for details. What you say makes perfect sense though.


Interesting now the way America's addiction to oil is on a collision course with the food supply.  Be interesting to see which choices are made.

[SALfan]

Yes, corn prices are moving upward.  There is a forecast of even higher 07 prices as demand will probably outstrip supply, based on the ethanol plants on line and new ones coming on line.  This year's production of corn is about 11billion bushels and next year's demand is forecast at 12 billion.

Good times in store for our ag friends.

ed

What are corn prices right now?  The last I read about them, farmers were still praying for $3 per bushel . . . the same price they were praying for in the early 1970's.  Don't get me wrong, I hope prices go up enough for farmers to make some money, but will believe it when I see it.  I don't know of anything else that costs the exact same amount it did 30 years ago.

[eastside]

MP173:

In the current issue (November 13, p. 60) of Business Week there's a long article "Harvesting Green Power" on how farmers in the Mid West are hitting the jackpot by going green.  In particular, it focuses on a coop in Minnesota that started an ethanol plant in the late '90s. "Eight years ago, a $10,000 stake has earned a total of $54,000 in dividends, and such an investment is now worth $55,000."  Some of them also installed wind turbines.  It indicates that havesting wind power and growing grain for ethanol could have a dramatic effect on farm incomes.

It discusses the effect ethanol will have on subsidies and the price of corn.

It's also on their Web site (but you have to be a subscriber).

[MP173]

Several points:

1.  My brother in law is just finishing up about 1500 acres, majority of it is corn.  He indicated there has been a recent run up in corn the last month, which occured after the meltdown in natural gas which lead to the big Hedge Fund shutting down because of natural gas losses.  He said that there was speculation in corn as the traders had to do something with their money.  I sorta discounted what he said at the time, but the more I think about it...sorta makes sense.  He is usually pretty accurate in his assessments of ag economy, plus he is a railfan.
2.  Higher corn prices might push ethanol out of reach, but I would be more concerned, if I were an investor in LOWER gasoline prices. I do not know the break even point where ethanol becomes a player, but gasoline prices are 2/3 of what they were a short time ago.  When gas was $3/gallon there was lots of talk about ethanol.  I know there was a regulatory change moving out of one additive to ethanol, but I am not that knowledgeable about the entire economics and politics.
3.  That being said, ADM is a huge player in the ethanol field and has major plans for construction of three new plants.  Their stock price shot up during the run up in gasoline prices but now has dropped off of the highs.  ADM is very connected politically, typically with both parties.  I dont know if ADM's stock price drop is due to higher corn, lower gasoline or both.
4.  Out here in the three I states (Iowa, Illinois, Indiana) corn is the major crop with soybeans being second and wheat a very distant third.  I think at $3 and above corn prices, there is very little subsidy needed to entice farmers to grow corn.  The insentive is in the price, which normally is in the $2 range.

Saying all of that...I am not a farmer (but I own a farm) nor am I in agbusiness, so my economic views might be off somewhat.  Dont want to come off as an expert and will gladly accept corrections/additions without getting into a flame throwing contest, as long as it is not about Montana wheat.

ed
4.