Watching events unfold at the end of 2023 into 2024 some observations in my opinion.
1. The really smart guys are sold out of wheat weeks ago at $9 plus and $16-17 canola. The next smartest guys are selling and hauling wheat now at $8.50-9.00 and Canola for $14-14.50 now. No snow to push, no heated grain, bills will be paid and money in the Bank when 4 feet of snow and -40 below hits in Jan/Feb/Mar....The ones doing nothing today will hate their life in -40 February when the sell for less. The only hope for canola will be the crushers, export market is done and will be cheap buyers, and the crushers can't buy it all. We need more crushers.
2. Grain price "pop up" experience of 2021/22 and part of 2023 are done. We are going back to pre-Covid numbers. Users are going back to hand to mouth, freight is moving normally, very little risk to upward price movement, buyers will wait till they have to buy and will bid low. The shorts are in control.
3. Land rents and land prices have topped out. People who locked in at high priced rent will hate their life in the next few years. People who broke records and paid insane land prices will make zero money for years to come on their prized investment, or lose it. That money invested in the local credit union will have been a better return. But as they say "greed can be a bitch".
4. Equipment prices have peaked. Free Cashflow on farms will not support current prices. Dealers and manufactures will reluctantly lower prices. Nobody cares how much their labor costs and steel have gone up...farmers will have no money to support the prices that have been paid. I wouldn't want to be a Seedhawk or Bourgaut manufacture....I mean paying $1million for one drill to plant a crop. We will look back and go wow. What were we smoking?
5. Interest rates will stay high for years to come 8-10%. On $5000 land that $400-500 per acre...farms will fail. Fixed costs are astronomical on many farms...variable costs will come down and have come down but won't make up for the high fixed costs farmers have got themselves into. Input companies will move quickly to sell farmers land to recover inputs not paid for. Land is so high and greed is off the charts so it will work for awhile till all the money runs out. Even the BTO's with daddy's 50 years of equity will be getting low. FCC employees will hate their life as the panic sets in. They helped create the mess. They have a history 40 years ago doing the same thing.
6. Crop insurance numbers will be down 25-30% lower coverage in March. Huge hit in coverage, just a reflection of grain prices.
7. Ukraine war is stalled and virtually wrapped up. Russia is the victor and grain will flow at full speed again. It's amazing the grain moved like it did. This will have a further negative impact on grain prices.
8. Huge turnover in farms coming. 40% of farmers plan to exit the business in the next 10 years. That will accelerate when the cash flow stops or is negative.
9. Federal Government hates farmers...can't even throw a bone on carbon tax relief. Western Canada should exit Confederation. There is no economic reason to stay.
Sorry to be so negative. It's just the way things are lining up. Greed has been fuelling the run up in a lot of areas agriculture, farmers, bankers, suppliers, manufactures and it's all coming to an end. Buffets said to be fearful when people are greedy and there has been lots of that.
The farmers who have done nothing but build up cash, pay debt down, and made
prudent purchases to add to their farms will have a chance to benefit from the reset that is coming. Low cost production operators will thrive and continue to grow.
Thoughts?
1. The really smart guys are sold out of wheat weeks ago at $9 plus and $16-17 canola. The next smartest guys are selling and hauling wheat now at $8.50-9.00 and Canola for $14-14.50 now. No snow to push, no heated grain, bills will be paid and money in the Bank when 4 feet of snow and -40 below hits in Jan/Feb/Mar....The ones doing nothing today will hate their life in -40 February when the sell for less. The only hope for canola will be the crushers, export market is done and will be cheap buyers, and the crushers can't buy it all. We need more crushers.
2. Grain price "pop up" experience of 2021/22 and part of 2023 are done. We are going back to pre-Covid numbers. Users are going back to hand to mouth, freight is moving normally, very little risk to upward price movement, buyers will wait till they have to buy and will bid low. The shorts are in control.
3. Land rents and land prices have topped out. People who locked in at high priced rent will hate their life in the next few years. People who broke records and paid insane land prices will make zero money for years to come on their prized investment, or lose it. That money invested in the local credit union will have been a better return. But as they say "greed can be a bitch".
4. Equipment prices have peaked. Free Cashflow on farms will not support current prices. Dealers and manufactures will reluctantly lower prices. Nobody cares how much their labor costs and steel have gone up...farmers will have no money to support the prices that have been paid. I wouldn't want to be a Seedhawk or Bourgaut manufacture....I mean paying $1million for one drill to plant a crop. We will look back and go wow. What were we smoking?
5. Interest rates will stay high for years to come 8-10%. On $5000 land that $400-500 per acre...farms will fail. Fixed costs are astronomical on many farms...variable costs will come down and have come down but won't make up for the high fixed costs farmers have got themselves into. Input companies will move quickly to sell farmers land to recover inputs not paid for. Land is so high and greed is off the charts so it will work for awhile till all the money runs out. Even the BTO's with daddy's 50 years of equity will be getting low. FCC employees will hate their life as the panic sets in. They helped create the mess. They have a history 40 years ago doing the same thing.
6. Crop insurance numbers will be down 25-30% lower coverage in March. Huge hit in coverage, just a reflection of grain prices.
7. Ukraine war is stalled and virtually wrapped up. Russia is the victor and grain will flow at full speed again. It's amazing the grain moved like it did. This will have a further negative impact on grain prices.
8. Huge turnover in farms coming. 40% of farmers plan to exit the business in the next 10 years. That will accelerate when the cash flow stops or is negative.
9. Federal Government hates farmers...can't even throw a bone on carbon tax relief. Western Canada should exit Confederation. There is no economic reason to stay.
Sorry to be so negative. It's just the way things are lining up. Greed has been fuelling the run up in a lot of areas agriculture, farmers, bankers, suppliers, manufactures and it's all coming to an end. Buffets said to be fearful when people are greedy and there has been lots of that.
The farmers who have done nothing but build up cash, pay debt down, and made
prudent purchases to add to their farms will have a chance to benefit from the reset that is coming. Low cost production operators will thrive and continue to grow.
Thoughts?
. Don't know how this will play out for my son who is taking over and more traveling time might be required if he wants more dirt.
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