Ag Credit: How is this supposed to work?

[TOM4CWB]

Charlie and Lee:

The grain advance system is not designed for high input/cost costs we have today!

Everyone wants me to hold 20% of my old crop grain inventory to July/August with advances paid off... and pay all our inputs up front with what?

We are being squeezed into a corner!

We have had a structural shift... who is actually prepared to double the capital... needed to run a farm today?

What bank wants to double our credit lines.... they want to cut them in half!

What choice do we have... but to cut inputs... and hope for the best?

Or are we supposed to do what the hog folks just did... and end up bankrupt?

[charliep]

A good question on the cash advance system that I will leave for discussion. Will note that any business (manufacturing, service industry, etc) has issues with working capital and they sort it out somehow with either their own cash or bank loans.

Will also question why the 20 % inventory number at the end of a crop year? Would hope that most everyone would have 80 to 90 % of their crop sold/delivered at the current time. If a farmer wants to sell and deliver grain, they should be able to have their bins swept clean by July 31 if not way before.

[TOM4CWB]

Charlie,

If the market needs 9% per month... to be supplied for the complete year... and it is often Sept 15 till new crop is ready to go... that is the point.

Are food suppliers/farmers different than others in the economy?

Who else has the weather factor... that often cuts inventory in half... or gives 50% extra... in such short time frames...

And if we are short widgets... will people starve because of this?

How many farmers are involved... in production... millions... compared to oil co's, machine manufacturers... etc.

Do you truly believe the mumbo jumbo modern gov.'s are preaching Charlie... that farmers are just another 'cog' in the industrial complex?

Just how long will people last... without food?

Now if money is here to serve society... shouldn't farmers have timely and low cost credit... to make sure food gets to the worlds grocery stores...

Isn't that the job of governments... to make sure monetary policy meets the need of society?

[charliep]

To the one point, farmers are a business like any other. You are right that the system needs grain inventory into August/September and perhaps even into October. When a farmer moves from old crop to new crop, are you paid carry (interest and storage)? What is the risk of an old/new crop inverse and who takes it? If it doesn't make sense from a business why would farmers do this?

My strategy/thoughts is that farmers should have the opportunity to have full delivery by the end of July. What is carried over between crop years should be a farmer investment decision (see opportunties for higher prices) or someone has purchased the inventory from the farmer and is paying interest and storage from the old crop months (no inverse).

From a supply standpoint to meet customers needs, the commercial system also has to be taken into consideration. Farmer delivers by the end of July. Commercial storage (ie. elevators and terminal positions) supply the market August/July. Come October, the commercial system should be relatively empty and ready to accept newly harvested crop.

[charliep]

Off topic but an interesting observation from a delivery is to compare wheat delivery patterns. Canola has an increase in deliveries in the fall but then smoothes out through the year. Wheat, on the other hand, has it biggest delivery month in July over a year after seeding.

Cash crop that pays carry early delivery. Board crop that pays only a partial amount (intitial payment) and has no carry built (paid the same regardless of when delivered with the exception of malt and IP programs), deliver late.

[melvill]

Tom, looks like you're having a discussion with yourself about whether a farm is strictly a business, with a sometimes pretty good lifestyle thrown in or whether a farm is a food production entity.

I have to confess that I lean toward the "farm is a business" side of the discussion but I'm also aware that the current rising food prices are, according to the UN, putting an additional 100 million people in danger of starvation.

[TOM4CWB]

Charlie and Lee,

I must wonder at all those who say "Farming is just a business"... until they 'THINK' they MIGHT be short of food.

Then all of a sudden... tariffs, export embargoes, export taxes, you name the gov. regulatory tools...they are being used on us.

That is right... even 'designated area' growers... that had no ability to sell uncommitted stocks of 2007 crop wheat ($20/bu), durum ($30/bu), barley ($10/bu), ... at the highest prices in history in January and February!

We are special all right...!

"It can't be done"... is not allowed to be in a "growers' vocabulary... but it sure is in the gov. rule books... every time I turn around!

GRIN

Any one who believes there is no 'cheap food policy'... had better stare long and hard at the CWB export license system!

I see no reasonable expectation of it being dismantled... do you?

HOW COMMERCIAL is it?

[skhadenuf]

Tom, what a breath of fresh air so to speak, you've hit the nail dead centre, farming is not like any other business simply because without food we are all toast. There should be a an underlying acceptance by everyone else in society that our governments create an environment first and foremost that we are able to plant our crops to the best of ability to insure everyone has adequate food. Our problem lies in those that think they can piss around with the industry and have everyone extract their profits at our expense and everything will just simply carry on as is we'll keep bending over handing over the vaseline to boot. In the mean time there will not be this average crop here in Saskatchewan at least, because with canola diving and jumping nearly a buck a day who's stupid enough to risk that?? Wait until the crop premium comes due and canola is 8 or 9 bucks in the fall and your dried out canola of 10 or 15 bushel to the acre comes off. All farmers better realize your farm could be the one in that scenerio ask yourself what good is your crop insurance? who's gonna pay the fertilizer and fuel bill with 80 or 90 dollar an acre income that barely covers your seed and spray? When there is a shortage of food it won't be just those people across the oceans that are going to cause problems it'll be right here as well!