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| In a review of long term market possibilities and opportunities I like to fall back on my real world experience in the feed & grain & fert. business. I have always believed in sound research & when a person studies numbers, sometimes they just become numbers and it is helpful, in my case, to interject some reality.
If you are operating a 200 ton mill your primary ingredients are corn & sbm along with the usual mineral sources & additives along with some meat scraps, some middlings, a smattering of linseed & etc. Dependent upon the species you are feeding your primary output is a mixture of protein & energy-meal & corn. Therefore I like to track soy meal consumption along with corn consumption as there is a rough relationship. The world demand for protein is strong and increasing. Granted we can use cottonseed, rapeseed & etc but those are not main stream ingredients.
Whenever I have placed myself in a vulnerable situation, it is the result of complacency. If SBM prices were not to my liking I would proceed hand to mouth & watch inventories carefully....except the reality is when customers are calling for feed, price does not mean much as you need some sbm on wheels....& is not a product to store very much quantity...so the world proceeds regardless of price & just have to manage future bookings & hedges & manage the best you can....POINT: the USERS in the world have been complacent: they look at the statistics & note we are buried in wheat around the world, huge oil seed crop & perhaps another record corn crop. There is no urgency.
The other factor, in our era of consolidation & multi-national firms, folks down the line generally have limited authority....it is tough for a purchasing department manager-on day 1 to present a view of abundant supplies & then on day 2 race into his/her superiors with an entirely changed purchase plan. The big boys in the striped suits then question the mental stability of the purchase manager as they, personally, usually have zero experience in markets. How do you justify this change in policy?? they ask. gut feel? Some iterant comment from the internet? NO....the striped suit boys want FACTS. Facts on Paper....
Our first facts appear with the august crop report.
What about Russia & Ukraine facts? Are you kidding? They live in an entirely different world of facts. Trustworthy? It can be a big unknown.
From my view, WE ARE NOT-AT THIS TIME-looking at any type of shortage. We are in the midst of RE-ADJUSTING DEMAND ACTIONS BY USERS. And by sellers. This takes awhile.
A long time ago, I enjoyed the wonderful experience of occasionally sharing a bottle of scotch with a well-known associate dean of ag at the Iowa ISU college. He was 1) an internationally respected agronomist -wrote a bunch of books on soils, soil nutrition & later branched out into climatology.....a lot of detail. His wife was also expert in markets & this association led me to follow the scenario our weather is cyclical...long term cycles....further, with some foundation in statistics, when we would evaluate his research in detail, he had attempted to measure what portion of our increases in crop yields were the result of 1)technology, 2) improvement in seeds,& 3) weather. Weather is at the top of the list.
Certainly seeds are more resistant to stress, except we have experienced a pretty decent cycle of production weather. Most of us know the 'perfect weather' required to grow top yielding crops in the I-states...but as I review 160 weather locations this year, there are some subtle differences as compared to the last 3 years. Will it make any difference? I have no idea. I just want to maintain an open mind yet in terms of these markets & keep one eye on the probability odds of a weather cycle change.
Higher AVERAGE grain prices this year and the next (IF SUCH IS THE CASE) will require some overall economic decisions. May well mean the printing presses (money) will have to again advance to high speed.
I am not ruling out we may have seen temporary highs on Friday...except I don't think we're quite through this deal yet. Sensible marketing is to take advantage of price strength as a seller, but the real world seldom freely passes out gifts...there is always a catch somewhere along the line.
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Reality Points
