TAGS: Marketing, Overseas
December 18, 2014
Steve in Michigan is understandably upset about commodity prices:
“Why is no one talking about super late planted all crops, what about an early frost! And to top it off no beans in the ground yet! Now another early frost consideration, we have group 3 beans that need 120 days? To top it all off what are they thinking? Whew it is all planted and now we can run prices down, now what about the acres that we planted that absolutely will never see a combine, we have water sitting on crops that will never emerge! Again what about all the lost acres to flooding. Oh yeah it’s planted that is all that matters to the idiots on the commodity exchange (which should be abolished along with the USDA’s fake reports). They are all fake news!”
I’ve received and heard several comments like this, Steve, so you are not alone. When someone is struggling to get planted and not always winning, it can seem like the rest of the ag sector doesn’t understand. I can only offer a couple of points an older commodity trader told me long ago when I first began with US Farm Report.
First, farmers who have been able to get planted and have relatively decent looking crops are wisely remaining silent and off camera. Nothing good can come from broadcasting how well you are doing. So whether the ag news is fake or not, we rarely show places with good crops during a weather crisis.
Second, especially now that the pits are empty at the commodity exchanges it is even harder to point to any single group of people who can move the market singlehandedly. As the trader told me, “Prices are established by two people reaching opposing conclusions from the same information”. There is a buyer and a seller for each contract. If some traders are pushing prices down by selling contracts, that means somebody is trying to push them up by buying.
Right now, all of us are making the best guesses we can, and the average of those imperfect predictions is the market price. This year’s extreme conditions will continue to make this a hot topic, but media focus on problems only can skew our perceptions about what is happening industry-wide.