By Frank J. Buchman
“That’s bold talk for a one-eyed fat man.”
Remember the line from True Grit in 1969? John Wayne aka Marshall Rooster Cogburn faced four armed mounted outlaws.
Reins in mouth, six-shooter in left hand, swivel-quick-cock rifle the other, left-eye-patched Rooster spurred Dollar forward at full run: “Fill your hands.”
Against high odds, Cogburn won, in the movie.
Not dissimilar, agriculture faces tough odds today, and will win, too.
That was the energetic, enthusiastic, attention-binding promise of Darrell Holaday at a Farm Profit Seminar in Paola.
The commodity broker from Country Futures at Frankfort relayed why agriculture’s “best days” became tight profitability, then analyzing “Which Way Do We Go?”
Claiming to be “keeping it simple,” the speaker related how “Cheap money created flow of capital for higher risk and return to an oversupply of assets.
“Distorted values brought domestic and overseas overproduction demanding economic adjustment and consequently depressed prices,” Holaday briefed.
“Still, the ability of U.S. agriculture to export has never been more critical,” Holaday contended. “Domestic consumption has peaked making exports extremely critical for the meat sector.”
The North American Free Trade Agreement (NAFTA) will likely be renegotiated. “Meat and grain trade with Mexico is very critical,” Holaday said.
Mexico buys 14 percent of U.S. Beef exports, 32 percent of pork exports and about 20 percent of corn exports. “This is serious stuff,” Holaday declared.
Discussion about who will pay for the “wall” dividing Mexico and the United States is insignificant, the speaker said. “They do not want to stop the flow of people across the borders,” he exclaimed.
Lessons are in the energy sector, according to Holaday. “Don’t assume that prices can’t go any lower. They can go below cost of production,” he said, pointing out oil production’s negative-cash-flow dilemma.
Tongue in cheek, Holaday said, “Meteorologists have predicted 10 out of the last four droughts,” bringing chuckles from the room.
Despite forecast of drought, corn and soybeans were planted early last year and combined have been the highest rated crops in U.S. history. Record production was reported for corn, soybeans and wheat.
Soybeans, however, are a “diamond in the rough,” Holaday said. “While record soybean acreage is predicted, there’s solid base in the export market.”
Big supplies of corn are fortunately meeting big demand. “Corn acreage will likely be down creating further market upside,” commented Holaday, admitting that “wheat is a problem for corn worldwide.”
With a record national wheat yield last year, “likely never to be matched again,” stocks are continuing to “pile on,” Holaday stated.
“Even with the world’s desire for protein, overseas wheat sales are decremented by low protein. “It will need to be blended,” Holaday insisted.
“Record wheat stocks points to the lowest acreage in modern history,” he said.
Summarizing grain outlooks, Holaday said U.S. and world supplies are growing at a faster pace than consumption.
His April 15 futures price projections: corn, $3.50-$3.60; soybeans, $9.40-$9.70; and wheat, $4.30-$4.70.
Concerning livestock price outlooks, Holaday said, “Solid expansion is seen in all sectors.”
He forecasted beef up 3-5 percent; pork up 3-4 percent and chicken up 3 percent.
Expansion of the nation’s cattle herd has begun. Still, long term beef production will not be limited by resources, but rather by economics, according to the speaker.
“We’ll like see mid-$80s cash and live cattle futures before we see a bottom of this cycle,” Holaday said.
“Export values of beef, pork and poultry cannot be overstated, such that these markets would suffer the most from a trade ‘situation,’” Holaday warned.
“Sell when there are rallies, take a profit when there is one, and don’t be greedy for more.
“Always be diligent with costs, but let uncertainty and ‘funds’ be your friends,” Holaday advised.