That’s from WaPo. In 2017, the US exported 1.2 billion bushels to China: North Dakota’s orphan soybeans today are nearly 1/5 of total sales to China in 2017…
“Lots of guys will be scrambling,” said Joe Ericson, a grower who operates a 5,000-acre farm near Wimbledon. “It’s going to be a struggle. This year might not be as bad because a lot of guys have forward-contracted a lot of this year’s crop already. But if it goes into next year, it could be tough for soybean.”
Peterson has about 25 percent of his crop under contract with a buyer and will store the rest. Many farmers in the region have begun dusting off old bins for storage. Others are hoping to build new storage facilities for the overflow, but steel and aluminum tariffs have driven up construction costs.
“We’re getting hit by both sides of the equation here,” he said.
This graph is helpful for those who believe current prices are not severely affected by Chinese tariffs.
Source: barchart.com, accessed 10/14/2018.
‘Others are hoping to build new storage facilities for the overflow, but steel and aluminum tariffs have driven up construction costs. “We’re getting hit by both sides of the equation here,” he said.’
Exactly. Something called storage costs which we are still waiting for CoRev to factor into his “model”. And of course the steel and aluminum tariffs have increased these costs.
Since pgl was dismayed by earlier facts, I’ll repeat what this article’s farmer said: “…This year might not be as bad because a lot of guys have forward-contracted a lot of this year’s crop already. But if it goes into next year, it could be tough for soybean.”
Peterson has about 25 percent of his crop under contract with a buyer and will store the rest. Many farmers in the region have begun dusting off old bins for storage….”
Yes, pgl, storing crops is/was common, and they do have forward contracts. An earlier WaPo reference said ~50% of this years crop was already under contract and that they were contracted at or near the year’s price height. I am forever amazed by pgls’ ignorance and need to make a fool of himself.
Farming is a business, and business decisions for the remainder of this year’s crops and what, how much and whether to plant next year are the uncertainty issues under consideration. Earlier in the week I was at an older friend’s farm, and noticed he had some of his fields in soybeans. I asked him what he expected to get for his crop, and his answer was nothing since he had leased his entire farm. I was not surprised by his answer since he is a little older than I, but we can put his decision in the “opportunity cost” category.
Dude – we got that the farmers who sold in forward markets before the trade war did OK. Maybe you have no clue that the issue has always been what is the effect on soybean prices since the trade wars? Oh yea – you think farmers can sell at above market prices even after these market prices have collapsed and stay low. Now I would not be accusing anyone of being ignorant if I had the total inability to look at what is happening in the market place. But you continue to do so. Should we define VERY SLOWLY what we mean by market prices? Maybe not as you still would get it.
Dude (pgl), “we got that the farmers who sold in forward markets before the trade war did OK. ” is an admission of most of your prior soybean comments were just BS. What you have yet to admit is that farmers doing OK is NOT bad, and you have exaggerated the negative over reality. The uncertainty is, has and will continue to be reported until prices and or the market demand improves, and it will. Every year some farmers’ crops will do better than others. It’s the core issue of farming as markets and weather affect crops. Farmer’s live with it. You should also try it.
Farmers live with annual and sometimes bi-annual market cycles (note the often made storage points) and quit letting your TDS driven cheering at short term price reductions versus those annual market cycles. Should we define VERY SLOWLY what we mean by market CYCLE prices? Maybe not as your TDS still would prevent you from getting it.
It’s sad an economist doesn’t get this.
You attribute a lot of BS to me – none of which I ever said or implied. You do live in a sad world where you have to make up straw men to argue against. One has to wonder why you are so obsessed this way. Did I kick your dog or what?
well peterson has about 25% of his crop under contract, which means he has 75% which is not under contract. that is the problem. and there does not appear to be any break in conditions coming up which will change that. you seem to believe the confidence fairy will come along and cure all. but the data, today, suggests otherwise. why do you think trump is providing welfare to the farmers, if the outcome is as you predict?
trump and MAGA “score” again:
https://youtu.be/8geLnpGmQAQ?t=1
Looks like we have another one of those African American “Welfare Queens” Reagan was always talking about. I hate to see stories like this, because it just reinforces widely-held racial stereotypes:
https://www.nytimes.com/2018/10/13/business/jared-kushner-taxes.html
https://www.washingtonpost.com/investigations/jared-kushner-and-his-partners-used-a-program-meant-for-job-starved-areas-to-build-a-luxury-skyscraper/2017/05/31/9c81b52c-4225-11e7-9869-bac8b446820a_story.html
It’s always the same lazy ones, bilking off the government, asking for handouts and contributing NOTHING.
If Jeff Sessions isn’t too busy kidnapping Mexican children from their parents and putting them in a cage and drugging them, and Sensitive Stevie Mnuchin isn’t standing 4 feet to the left of trump at a trump press conference as trump tells America Nazis are really cool people, maybe either Mnuchin or Sessions could do something about this. Naaaaaahh!!!! Sessions has “better things to do” on his morning treadmill and Mnuchin has his “Douche’s ‘Honey Do’ list” his wife gave him to attend to.
For those who still think the tariffs are not hurting the Chinese economy: “China’s Auto Sales Face First Annual Decline in Decades”
https://www.wsj.com/articles/chinas-auto-sales-face-first-annual-decline-in-decades-1539345272?tesla=y
A couple of take aways:
“The U.S.-China trade dispute is worrying consumers, who fear its potential to affect the national economy. Analysts say credit curbs have also made it more difficult for people to secure car loans. And flagging stock prices aren’t helping consumer confidenceThe Shanghai Composite Index has fallen by more than a quarter since this year’s high in late January.”
and
“Nomura Securities Co. said Thursday it expects fourth-quarter sales to fall 7.5%, resulting in a full-year decline of 1.6%, which would be the first annual decline for China’s passenger-car market since 1990, Consumers are delaying vehicle purchases because of anxiety about the economy, Nomura said.”
Only on US liberal sites do we see similar comments about the US economy.
CoRev: Who said the Chinese economy wasn’t being hurt? Wasn’t me. In fact, the first thing one learns in international economics textbooks is that when both countries put tariffs on, net impact on national welfare is usually negative. Not that I expect you will ever read a whole book.
Is this one of those “liberal” websites you were referring to?
Menzie, who? Our sarcastic poster child for deflection, pgl.
”
pgl
October 11, 2018 at 11:57 am
My how you cherry picked the dates. Try doing the 10-year time frame to see how this stock index soared, crashed and then partially recovered. This episode had been discussed at length by the economist blogs and NOT ONE attributed the stock variations to the soybean tariff…” His deflection was to limit the tariff impact to the soybean tariff, which no one had claimed. Pgl’s comment implied the current change in the China economy was natural. Or he was just lying.
CoRev: As far as I can tell, pgl doesn’t say the Chinese aren’t hurt by tariffs. He says, the Chinese authorities can offset the negative effects with fiscal/monetary stimulus.
By the way, the Chinese stock market was declining, and GDP growth — as far as we can tell — decelerated before the Trump tariffs were imposed.
Menzie, comments: ” Who said the Chinese economy wasn’t being hurt? ” and then
” the Chinese authorities can offset the negative effects with fiscal/monetary stimulus.” “Negative effects” were at least partially caused by the tariffs, one of which is for soybeans? Then are you refuting pgl’s deflection?
As far as i can tell you are walking a very shaky fence or just being hypocritical. As far as I can remember in all these soybean articles NO ONE fits this description: “This graph is helpful for those who believe current prices are not severely affected by Chinese tariffs.” Why do you persist in this implication?
I’m sarcastic? I’m sorry I do not tow the Lawrence Kudlow line 24/7 like you do. Economic analysis is now sarcasm – go it!
The Chinese are buying less cars? That should make you good buddy PeakTrader happy as he insists: (a) Germans cannot buy cars; and (b) Chinese car production will end the universe. Oh wait (b) was not Peaky’s stupidity – it was yours! BTW – call GM and Ford. Their car sales at times have declined from time to time. Our world did not end because of that although your Republican buddies would have let the disaster in 2008 tank the rest of the economy,
Steel prices rose over 40% from the beginning of 2016 to mid-2017, fell, and then rose again, and not much higher than the 2017 peak.
Aluminum prices are relatively low compared to past years.
https://fred.stlouisfed.org/series/WPU101707
https://fred.stlouisfed.org/series/PALUMUSDM
From the BLS regarding the 25% tariff on steel and 10% tariff on aluminum:
“…if a domestic producer is manufacturing a product that is subject to import competition and tariffs are placed on those imports, the domestic producer may increase its own prices in order to maximize revenue. In this case, the price increase for the domestic producer would be included in the PPI. Similarly, if a domestic producer exports products to a foreign country that placed tariffs on U.S. products and the domestic producer lowered its prices either to better compete in the export market or to sell domestically excess inventory that resulted from those tariffs, those price decreases would also be reflected in the PPI.”
PeakTrader: Yes, well, that’s how tariffs work…is there some content here that you believe is new to the readers?
Menzie Chinn, that helps explain the recent rise in steel prices reflected in the chart above.
Commodity prices exhibit volatility. Gee Peaky – write a paper on this and you will win a Nobel Prize because no economist in the history of time has ever realized that commodity prices can vary! Snicker!
Ziva Branstetter—->> @ZivaBranstetter is very conceivably the best journalist the state of Oklahoma has EVER had. She digs and does pure investigative journalism while other people do “copy/paste”. Trust me when I say she is one of the best journalists working in our nation today. She just changed jobs from “Reveal” to Washington Post. I highly recommend ALL of Menzie’s readers (including Menzie himself) to give Ziva a follow. She is a credit to her gender and a credit to her profession:
https://twitter.com/WashPostPR/status/1050382479692111873
Do yourself a HUGE favor and :follow” her on Twitter and do it, like, NOW ——->>> https://twitter.com/ZivaBranstetter
The US Soybean Council estimates that only 100K acres of soybeans would meet U.S. human food demand of that product. Most goes into feedstock after the oil is removed. The oil could be a significant source stock for biodiesel, but the EPA pretty much squashed diesel-powered vehicles in the U.S., probably because of the petroleum-based diesel characteristics. Vehicle manufacturers have decided to abandon the diesel for personal-use vehicles. Too bad, that would be a significant market. https://unitedsoybean.org/media-center/issue-briefs/biodiesel/
Bruce Hall: But most of US soybean exports to China is for feed; so what possible relevance is your point?
@ Menzie
It’s kind of a dumb-ass point, but what I think he is trying to say, is that if the EPA allowed the soy oil to be used as fuel for domestic vehicles, then we wouldn’t be seeing the price drop so dramatically, or at least go as low as it is now. I give you it’s a dumb-ass argument, but that’s never stopped Bruce, CoRev or Ed Hanson before. In fact if you’re ever trying to figure out what (if anything) they are saying, it’s best to just think “What is the near-to most dumb-sh*t way you could view this??” and then usually you can figure out what they mean. Or just think of it like it’s a Sarah Palin speech:
https://youtu.be/UZ3LA4edVwk?t=153
The point Bruce missed is that the Chinese feed soybeans to their hogs. Pretty dumb indeed but not as dumb as CoRev’s assertion that one cannot feed something else to those hogs. Of course CoRev is going off on both Menzie and me today as he makes up his usual straw man arguments to rant on and on about. With all that straw – the hogs will have plenty to eat.
Pgl, please understand that soybeans, especially its meal, are used around the world for feeding stock, especially pigs because it is a complete protein requiring fewer additives to make a superior and nutritious feed.
You do not even realize this comment is nearly all sarcasm. However this portion is just ignorant: “The point Bruce missed is that the Chinese feed soybeans to their hogs. Pretty dumb indeed but not as dumb as CoRev’s assertion that one cannot feed something else to those hogs. …With all that straw – the hogs will have plenty to eat.” Please , please learn the difference between STRAW and HAY as used for feed. Your surprise that soybeans are used as feed is hilarious.
Calling me dumb while showing this extreme ignorance is really dumb.
Pgl, it’s very hard to have a discussion when the moderator fails to allow comments in response. Here’s a general analysis of your above attempt at a response. When needing to resort to analogies, the stock market, when the subject is a commodity, soybeans, just confirms I was correct when my calling you ignorant of the subject.
Menzie,
Many agricultural products have multiple uses. Soybeans can be used for animal feed and that is the dominant application. But those same soybeans could be used for making bio-diesel fuel which is much cleaner than petroleum diesel fuel. The residual pulp, which is used for animal feed, would then be lighter in weight, more compact, and already processed for animal feed… plus could be sold at a fraction of the cost of whole soybeans making them much more price competitive than whole soybeans. However, the EPA vendetta against diesel-powered vehicles has poisoned most of that market despite the significant opportunity to increased miles/gallon. Without diesel vehicles to bolster demand, soybean producers are left with fewer market opportunities for their product. I think there is an economics less in there somewhere.
“Many agricultural products have multiple uses.” Granted. And there are many ways to feed a hog. Can you let CoRev know this as he truly does not get it. Of course CoRev may decided to go off on you with one of his insane rants so maybe taking it easy on this overexcited little one is advised.
pgl,
I’m pleased that you agree with the simple premise that many agricultural products have multiple uses. But beyond that, there is another economics lesson to be learned: “don’t put all your eggs in one basket”. It’s great that China opened a market for U.S. soybean producers. It’s not so great that China now has a massive economic lever against those producers. That’s why it is important to have multiple uses and markets for a product. Without them, a producer is subject to major disruptions.
Sears is a good example. It started out as a catalog-based company and then really made its mark in brick and mortar “general” stores. It became locked into that selling paradigm and dragged its feet as big box competitors came on the scene with narrower focuses… hardware… electronics… clothing. It was slow to react to Walmart and slower still to Amazon. The once big retail market for their general stores got run over by bigger, more specialized, more efficient, more convenient competitors. But still they clung to their way of doing business and are now going out of business.
You may not remember when Henry Ford grew his own soybeans for use in automobiles. He innovated. https://www.thehenryford.org/collections-and-research/digital-resources/popular-topics/soy-bean-car/. Unfortunately, farmers can basically just farm. They aren’t very good at end-use development. But that doesn’t mean that there are not opportunities (other than bio-diesel fuel) for soybeans. Here’s a very new example: https://phys.org/news/2018-10-industrial-wax-soybean-oil.html
Sears didn’t die overnight; soybean uses won’t change overnight, even in a disrupted environment. But such disruption which is initially painful could lead to a greater diversity of uses and a much better marketplace for soybean producers. Too bad Henry’s ideas didn’t have a chance to succeed because of WWII disruption. We might not have tariffs on steel and aluminum.
Bruce Hall That’s why it is important to have multiple uses and markets for a product.
Important to whom? Important to the soybean farmer? Yes, because it would reflect higher demand and therefore higher prices. Important to soybean users? Probably not, for exactly the reason you said; viz., they would lose leverage. But if you believe in market economics, then you have to ask yourself why the market isn’t creating as many different uses as you seem to believe it should. Is there a market failure that needs to be corrected? Or is this just yet another case of special pleading by Big Ag? Are soybean farmers really closet centralized planners promoting another Five Year Plan….oops, I mean Five Year Farm Bill?
2slug,
The “market” for [product X] is what is made by innovators. Soybean farmers are too fractured as producers to be innovative with their product. Silo operators don’t care what’s in their silos. Commodity wholesalers don’t have time to be very creative. Which leaves the end users to be the source of creativity (unless there is a large, vertically organized corporation like Ford Motor Company was under Henry Ford who could go from farming to innovation to end use).
But my original point was that the farmers got locked into China for the sale of their product because the only other major use besides cooking and animal feed was bio-diesel which had its legs cut out from under it by an aggressive anti-diesel government agency. Consequently, unless new uses such as the biodegradable coating for cardboard opens new markets, the growing of soybeans in the U.S. may well be on the same road as Sears… a product/provider that has no market. Or the tables may be turned in a few years if U.S. soybean growers switch for awhile to other crops and South American and Chinese growers can’t meet global demand. Brazil farms approximately the same number of acres of soybeans as the U.S. It’s unlikely that it could make up a large shortfall if U.S. producers switch to other crops.
There is no amount of farmer “central planning” that can “correct” imbalances from year to year, but there certainly are actions by the government that can disrupt markets. Family farms account for about 80% of the soybean production in the U.S. I suspect that they will either adapt or go out of business to be replaced increasingly by larger corporate farms that may have more ability to do “central planning” and dictate supply.
“There is no amount of farmer “central planning” that can “correct” imbalances from year to year, but there certainly are actions by the government that can disrupt markets. ”
bruce, i assume by such commentary, you would also promote the government to disrupt energy markets by promoting alternative energy sources, just as you would have the government promote biodiesel in the auto sector? or is government disruption ideologically driven?
@ Menzie
I can’t get past the blasted paywall, but saw the headline and assumed you’d be interested:
https://www.nytimes.com/2018/10/14/us/politics/wisconsin-scott-walker-tony-evers.html?smtyp=cur&smid=tw-nytpolitics
I managed to get past the fire wall and found a long and rambling mix of actual economics and some serious BS. Skipping the BS – here is the substance:
But now there’s a rising debate over whether this state needs more than Mr. Walker’s unbending rectitude. One question for Democrats is whether they can successfully make an economic argument at a time when Wisconsin’s economic indicators are strong. By most metrics, Wisconsin’s economy is doing well. At 3 percent, the state’s unemployment rate is well below the national average of 3.7 percent…In addition to the state’s 3 percent unemployment rate, wage growth is picking up speed after lagging the rest of the country for much of 2016 and 2017. Average hourly earnings in the state are up five percent from a year ago, compared with a 2.9 percent increase nationally. “It’s hard to argue we need a change economically as people are doing well,” said Noah Williams, director of the Center for Research on the Wisconsin Economy at the University of Wisconsin — Madison. The turnaround was a long time coming, however. The state lost more than 175,000 jobs between 2008 and 2010 and it took until 2015 for total employment to get back to where it had been before the recession. One of Mr. Walker’s campaign promises during his initial run for governor in 2010 was to create 250,000 jobs in his first term, which ended in early 2015. He reached that goal in April 2018, more than seven years after taking office. “Most people feel that the state is really doing well,” said Rosanne Hahn, a retired teacher who conferred with Mr. Walker outside his Burlington event and said she plans to vote for him. “A lot of times there are many jobs and people won’t take them,” Ms. Hahn said…When Mr. Walker first entered office, he cut spending on schools. Gradual increases followed and the most recent budget had an infusion of new dollars, Tamarine Cornelius, an analyst at the Wisconsin Budget Project, said. But, she added, the new funds were not enough to make up for the initial cut, after adjusting for inflation. Aid to the state’s university system has also been cut under Mr. Walker. In the 2010-11 budget year, state funding totaled $1.179 billion. It dropped by $178 million the following year after he took office, and stood at $1.06 billion in 2017-2018. Under Mr. Walker’s watch, the state ranked 44th in a U.S. News and World Report ranking of road quality. Adjusted for inflation, in fiscal 2019 Wisconsin’s transportation budget remains 20 percent below where it was in 2010. Even as needed services were deprived of money, Mr. Evers says, the state was agreeing to a deal that would provide $3 billion in tax credits so that Foxconn, a Taiwanese electronics company, could build a campus in Southeast Wisconsin. “We’re starving the school systems but giving this Hail Mary version of economic development with one company?” Mr. Evers said. “It’s a terrible deal.” Around the state, Democrats said they had not felt the benefit of the state’s impressive economic statistics. Manufacturing plays an outsize role here; the factory sector is responsible for 18.6 percent of economic output, compared with 11.7 percent for the United States as a whole. Nearly half a million Wisconsin residents work in manufacturing, up 24,000 since the beginning of 2017, but still shy of the total before the recession. “Whoopee!” Denis Olson, who is 62 and fixes tractors, said of the state’s low unemployment rate. “If you’re looking for a job for a buck over minimum wage you can find them. Every low-paying job is hiring, but who can live on that?”
Judging from CoRev’s overheated rants and basic straw man arguments, maybe it is time for someone to help him afford his meds. But let’s take his basic argument that soybean farmers cannot be losing out even as soybean prices have plummeted:
“Peterson has about 25 percent of his crop under contract with a buyer and will store the rest. Many farmers in the region have begun dusting off old bins for storage”.
Let’s do an analysis that anyone saving for retirement should get. Let’s imagine a dude named Pete decided to hold 25% of his portfolio in safe assets risking the other 75% in the stock market. Yes if a farmer had 25% of his crop under a forward contract before the Trump trade way – he will not lose on that part of his crop portfolio. No one has ever disputed that – especially not me even though CoRev is now saying I have. Let’s skip his latest lie and focus on the other 75%.
Let’s imagine Pete put all of his stock portfolio into companies like Chevron and Exxon when oil prices were near $100. Guess what happened when oil prices dropped to $40 a barrel. Pete’s portfolio took a nose dive. Now I bet if CoRev was his investment adviser – he would have told Pete that his portfolio would clearly be profitable in the long-run as everyone knows oil would soon be priced at $120 a barrel.
Yes – this kind of investment advise is beyond laughable. It is incompetent. But this is how CoRev thinks about soybean farmers. Of course anyone who even remotely understood the Efficient Markets Hypothesis would stop making such insanely stupid statement. But we all know CoRev refuses to read even Fama’s 1970 seminal paper. Yes – he would rather wax on and on with his insanity which he is amazed that the rest of us do not share in.
Actually, I don’t think CoRev is a real soybean farmer. He’s probably more of a hobby farmer who dabbles in a few acres of this and a few acres of that. And I doubt that it’s his primary source of income. Given all that, we shouldn’t be too surprised that he sees all of this as basically playing with house money. But real soybean & corn farmers in the Midwest take a very different approach. In a few weeks they are going to have to decide whether to prepare their fields for soybeans or corn. They will have to start lining up bank loans. They will have to start dealing with seed and fertilizer suppliers. And lining up crop dusting services for mid-summer. But before they can do all of that they will have to decide how many acres to plant with corn and how many acres to plant with soybeans. This year will include an additional risk factor that is above and beyond the normal year-to-year risks. This year they will have to guess as to the “state” variable; i.e., will the tariffs still be in place or not. Normal year-to-year risks are quantifiable, so a farmer can at least estimate an expected portfolio return. But this new “state” variable reflects a kind of policy “Knightian uncertainty” that is not quantifiable.
It’s also worth pointing out that just because a farmer negotiated a contract before Trump’s tariff war got going doesn’t mean there won’t be an effect on next year’s price. In the short run the unlucky buyer will take a hit, but over the long run the incidence will get distributed according to the relative elasticities of the farmer and the buyer. If the buyers of those contracts cannot find markets this year, then they too will store some of their crop for next year, which will depress next year’s contract prices. It’s like a game of musical chairs. Just because you were lucky and grabbed a chair when the music stopped does not mean you’ll survive the next round when there is one fewer chair. Trump’s tariff war means there will be fewer and fewer chairs available after each song.
2slugs, an interesting perspective. You are finally getting the point that today’s prices are not important as the crop is just starting or barely harvested, and the China purchases usually occur in the next 5-6 months.. You are also realizing that farming is an annual not daily/monthly decision process. To date we have seen a series of articles, primarily on soybeans, that concentrated attention on the immediate price status. You well described the farmers dilemma for next year’s crops.
Many times we have seen statements that much of the soybean crop is/was already forward contracted at or near the annual high price. That leaves the remaining half to be contracted or held/stored for later contracts. We also seldom see the $1.65 price support referenced. This important as the current IL cash prices TODAY ranges from $8.09 -8.17 to which this support could be added. The average price/bu farmers received last year was $8.97. You can do the math yourselves to estimate how badly farmers in your area will be harmed.
This chart shows where and how much China imports soybeans: https://assets.bwbx.io/images/users/iqjWHBFdfxIU/i..RGUKmRIEQ/v2/490x-1.png from this article: https://www.bloomberg.com/news/articles/2018-10-09/fat-pigs-fed-less-is-china-s-latest-strategy-as-trade-war-rages Note, Chinese soybean purchases usually are just starting at this time of the year. Although not available on the chart it appears Chinese processors bought later this year in order to stock pile because of the then impending tariffs. Stock piling is a euphemism for storing.
Since this article is about US storage limits, no one has mentioned that China also has a similar problem with all the stockpiling done. It would not be unexpected that the traditional China buying season in the US will be delayed while they empty their own storage facilities. When their inventories are lowered then we should see some movement in Chinese purchases.
“You are finally getting the point that today’s prices are not important as the crop is just starting or barely harvested, and the China purchases usually occur in the next 5-6 months..”
Just wow! Have you not noticed that Menzie is documenting future prices are way down too? Or maybe you have no clue what his charts even mean. Lord – your stupidity is off the charts!
Pgl, no matter how much information is provided you still misinterpret it. If you understood this market at all you would have noticed I said it looks like China’s demand will be delayed from it’s normal November start. We all agree that demand will also be reduced due to the tariffs. That leaves US supply in surplus because of both a bumper crop and reduced demand from China, our largest customer.
You have consistently shown your ignorance of the soybean market. Since this is an economics blog, economists should have intuitively understood those terms, supply and demand, and their impacts, but you have been all over the place denying their existence or more often exaggerating their impacts. Your comment: “Have you not noticed that Menzie is documenting future prices are way down too?” is exemplary of your misunderstanding of this derivatives market and how today’s price changes DAILY because of supply and demand. Your prior questioning of my understanding of of the WaPo claim that ~1/2 the 2018-19 crop was forward contracted at the then peak prices further indicates your ignorance of this market. Apparently you didn’t understand forward contracting.
Your shock that soybeans were used primarily for animal feed was another indication of that ignorance. At least it appears you were not alone there. Even though it is the processed output, soybean meal, used for feed. As an economist it is also surprising that you have failed to notice the futures market for the soybean processing byproducts, meal and oil. China buys unprocessed soybeans to process. A fact totally undiscussed here and apparently misunderstood by you.
For these many articles your comments have shown a great deal of ignorance with almost no change, even though tons of information has been provided.
“Since this article is about US storage limits, no one has mentioned that China also has a similar problem with all the stockpiling done. It would not be unexpected that the traditional China buying season in the US will be delayed while they empty their own storage facilities. When their inventories are lowered then we should see some movement in Chinese purchases.”
i would assume those stockpiles are being reduced now, each day the chinese do not buy any new soybean. so they should be increasing their daily capacity to ship and store additional stock. this is not true of the us storage issue-it cannot change until new sales begin again. yet i still do not see the chinese coming in and buying any new stock today. they have a solution for full storage, us farmers do not. it is not a symmetric problem corev.
Baffled, never said it was. China buying should be delayed by a month or two and reduced for this crop year. I’ve said this twice now. How many moire times do you need?
it means the chinese do not have a storage problem, in contrast to your statement “China also has a similar problem with all the stockpiling done.”. china consumes continuously from its stock, the us does not. china does not have a stockpile problem compared to us farmers. you are wrong corev. if china were to delay buying-and currently they seem to be boycotting-it is not because of a storage problem.
Imagine the dilemma facing California growers of almonds, pistachios, walnuts, and oranges, There are no alternate crops for them to replace or boost any lost profits.
Good to know, however, that HOuse Republicans from the valleys—led by McCarthy and Nunes— will protect their constituents even if it means they have to confront their glorious leader and cease licking his boots for the time being.
OK, I’ll stop. The prospect of those two growing spines has me laughing too. But “My Kevin” has promised to pimp for $25 Billion to build that wall. That should ease the problem of growers in his district to find workers to replace the tens of thousands of undocumented laborers already there. Sorry, I’m laughing again.
Trump’s old story: “MBS assured me he had nothing to do with Khashoggi’s disappearance.
Trump’s new story: “They were just interrogating him and they just happened to have a bone saw and somehow one thing led to another and … it was an accident.”
Fifteen Saudis go home with diplomatic attache cases.
Trump threatens harsh punishment. He’s going to raise the Saudi room rates at the Trump Hotel in DC.
He said it “strongly”! Kavanaugh also said it strongly with respect to it being some other dude who attacked Dr. Ford. Hey Trump has “strongly” lied all his life so hey! And of course Khashoggi could have been killed by rogue agents just like Dr. Ford was supposedly raped by some other Georgetown Prep jerk.
Trump threatens harsh punishment.
Just like he promised to release his tax returns?
Just like he promised to donate $1M if Sen. Warren took a DNA test?
Just like he promised he’d never settle a civil suit out of court?
Just like he promised Mexico would pay for the Big Beautiful Wall?
Just like he promised Melania that he didn’t have sex with Stormy and others?
The secret power of those MAGA hats isn’t that they make you fly like Superman; it’s that they leave voters who wear them with a bad case of amnesia.
“Anonymous
October 15, 2018 at 1:09 pm
Pgl, it’s very hard to have a discussion when the moderator fails to allow comments in response. Here’s a general analysis of your above attempt at a response. When needing to resort to analogies, the stock market, when the subject is a commodity, soybeans, just confirms I was correct when my calling you ignorant of the subject.”
I guess this is CoRev – or maybe it is his Minnie Me! First of all our host has allowed CoRev a lot of comments. Dumb comments mind you but lots of them. Maybe little Minnie Me should realize CoRev brought up the Chinese stock market – not me. Of course CoRev has no clue about that particular stock market. He is also unaware that people consider commodity futures are asset in their nature. Yes Minnie Me – your hero (CoRev) is totally ignorant of the basic financial economics that surround this topic. Tell your good buddy to start with Fama (1970). DUH!
Pgl good guess. I hit return too early. I’ve read Fama, but you persist in not accepting. What you forget is that “commodity futures (contracts) are” also possible liabilities. Your failure to provide a complete description, “commodity futures (contracts)” is just another indicator of your ignorance of this market. As your Minnie Me should have said, pgl is totally ignorant of the basic financial economics that surround this topic.
“I’ve read Fama”.
Reading a paper is not the same thing as understanding it. And I have read a ton of your babblings none of which give any indication that you even remotely grasp the Efficient Markets Hypothesis. Of course this is one of the cornerstones of financial economics so I’m not surprised its implications are something you cannot be bothered with.
BTW you ticked off a slew of blatant lies earlier but let me choose just one:
“Your shock that soybeans were used primarily for animal feed was another indication of that ignorance.”
Talk about a straw man argument. I knew that and was not shocked at all. All I noted was the Bruce Hall got it right when he said there could be multiple uses.
Listen – I get that you need to lie about what others have said as it is the only way you can pretend you are smart. Amuse yourself all you what. The rest of us are laughing but not with you. More like at you.
Pgl: ”
pgl
October 15, 2018 at 9:46 am
The point Bruce missed is that the Chinese feed soybeans to their hogs…”
Pgl again: ” I knew that and was not shocked at all.”
Actually you did not know that. Your Chinese feed soybeans tot heir hogs indicates you don’t understand that unprocessed soybeans are seldom fed to anything. Nearly all are processed into their two major products oil and meal, what remains after the oil is extracted. From these two products multiple products may be produced, but
” …Most soybeans are processed for their oil and protein for the animal feed industry…. The processors bake the high-protein fiber that is left after the oil is removed and sell it for animal feed….”
http://ncsoy.org/media-resources/uses-of-soybeans/
Your commenting is sloppy or you didn’t know. Either you did not know what soybean product was used in feed, or you thought the Chinese were feeding unprocessed soybeans to their animal stock. As an economist claiming to know how soybeans are used you should have recognized using unprocessed soybeans is perhaps the most wasteful use, locking the very valuable oil in their animals.
Your response is very unconvincing without using some of the keywords.
CoRev: In terms of the economics of impact on farm income, incidence on Chinese importers, etc., does it matter? Cointegrating vector between (log) soybean price and soymeal price over the 1980-2017 period is (-1 1), i.e., there is a unitary elasticity between the two over something like 37 years, regression of growth rates on growth rates yields a coefficient of 0.80, R-squared of 0.79.
Menzie, I never said it would make a difference to farmers. Why did you bring up the consistency of prices, when there has been no break through in soybean genetics altering the oil content nor soybean use? In your words does it matter? Today’s market difference is who and where is the soy processed, here or China? Leaving the potential major sub-product profits in the processing location.
actually corev, this is an example of the spurious arguments you try to make when all else fails. according to your logic, if somebody discusses oil in the context of the automotive industry, you should also complain because what you really wanted was them to state gasoline or diesel directly. otherwise you think they are unintelligent in their discussion. it is simply nitpicking at a level the discussion was not at-nor needed to be. at the end of the day, even if you want to discuss the details of soybean oils or remaining feed, it does not change the fact it is still SOYBEAN. corev, you appear to have tooooo much time on your hands. try and do something productive with it, rather than be the old uncle who complains ALL THE TIME.
Why might Donald Trump coddle a murderous thug in Saudi Arabia, other than just simple admiration for his authoritarianism?
Here you can see the general manager of the Trump Hotel in NYC crediting the Saudi royal family for the financial boost to their income in the first quarter of 2018:
https://twitter.com/Fahrenthold/status/1050495610422525953
In addition, the Saudi government spent over $270,000 at the Trump Hotel in DC.
Yes, we have a corrupt president who puts his own financial interests ahead of the country. It’s blood money. Some would call it treason.
Trump to @AP on Saudi:/Khashoggi: “Here we go again with you know you’re guilty until proven innocent. I don’t like that. We just went through that with Justice Kavanaugh and he was innocent all the way as far as I’m concerned. So we have to find out what happened”
Nice that Trump is equating Kavanaugh to 15 Saudi assassins with a bone saw. Works for me.
CoRev –
One of your comments above (“Yes, pgl, storing crops is/was common, and they do have forward contracts. An earlier WaPo reference said ~50% of this years crop was already under contract and that they were contracted at or near the year’s price height.”) bears on an unrelated issue that I needed to address earlier this year.
According to an Ag Econ professor at a major university in the Corn Belt, no one collects data on what proportion of farmers choose to forward market their crops or on what proportion of their crop is forward marketed. He subsequently conducted a survey of the farmers he works with on a regular basis and found that around 25% of the 2018 crop in his state was forward contracted.
My questions for you are (1) whether you think the WaPo figure is accurate, and (2) what source are they relying upon to come up with this estimate.
fs, the article is too old now to go look it up, but to answer your questions, yes, this year of the tariff/tariff threat I do believe ~50% of the crop was forward contracted, and I do not know the source.
The problem with the forward contracted farmers it is probably the large farms that have done it. Most small farms sell locally at cash/spot prices. Although I do varguely remember the USDA in one of the WASDE reports saying similar.
His source seems to be Fox and Friends. Hey if Trump finds that to be reliable – why not?!
Substance, pgl, substance please.
fs, your comment raised an interest to find that article. https://www.washingtonpost.com/business/economy/soybean-farmers-are-surviving-trumps-trade-war–even-without-his-12-billion-aid-package/2018/07/30/c3340bb6-91bb-11e8-8322-b5482bf5e0f5_story.html?utm_term=.47be7ae99bf5
In it is says this: “In a poll of 7,000 farmers, FBN found that nearly half of this year’s soybean crop is forward-contracted, which means it isn’t subject to falling prices. Those who have not already sold their crop will wait until harvest or later.” I’m guessing FBN is Farmers Business Network https://www.fbn.com/
fs, I found even another estimate of crop hedging:http://www.agrinews-pubs.com/news/crop-check-survey-finds-yields-close-to-usda-projections/article_5e1ef9eb-347d-5390-877b-e75cd5916a63.html
“Hedging
The survey also asked farmers how much grain they have stored on-farm and how much old and new crop grain has been sold.
During the Aug. 20-31 survey period, about 22 percent of old crop corn and 21 percent of old crop soybeans are yet to be sold.
The survey indicated 25 percent of new crop corn and 33 percent of new crop soybeans were already sold.
“That soybean new crop sales percentage is a little higher than the general numbers we see on this survey. So, for the most part, producers are relatively more hedged than we expected to see as far as corn and soybeans,” Nelson said.
The wheat marketing year began June 1, and 36 percent of the wheat has been sold.”
It would appear that in two surveys we have estimates of from ~33 to ~50% of the 2018-19 soybean crop is already sold.
“It would appear that in two surveys we have estimates of from ~33 to ~50% of the 2018-19 soybean crop is already sold.”
and it has been sold at a low price. even the article says the situation for soybeans is not rosy at all. 21% of old crop soybeans has not been sold. and the price of this will deteriorate further with each passing month.
Baffled, wrong again. “and it has been sold at a low price. ” The WaPo article also said this: “Soybean growers have been cushioned by the widespread use of forward contracts that allowed many to lock in high prices last spring, and analysts predict they will be buoyed at harvest by strong global demand for soybeans.” Last Spring was the peak of the prices. NOT THE BOTTOM as you speculate.
You are correct: “21% of old crop soybeans has not been sold. and the price of this will deteriorate further with each passing month.”
“and analysts predict they will be buoyed at harvest by strong global demand for soybeans”
so far this appears to be incorrect. so they sold off roughly 30%, SOME at pre-tariff prices, some not, and they are now sitting on the majority of their stock in a market that has few, if any buyers, at this point. corev we are now pushing november, and transactions are few, small and cheap. and point of notice, the agrinews article certainly does not imply that the 30% sold were done so at all time high values.
😉
corev, i guess by trying to be cute, you are avoiding acknowledgement that my discussion is more accurate than your promotion that all is well in the hedged world of soybean farming.
Thanks, that’s helpful.