Friday, December 31, 2010
Farm Prices, Dudes And Dudettes
Now, I have been working 12-15 hour days, so I don't have much time. But here's a gentle hint as to what I would write about if I did have the time to write:
A) Prices Paid by Farmers
The December Index of Prices Paid for Commodities and Services, Interest, Taxes, and Farm Wage Rates (PPITW) at 191 (1990-1992=100), is up 1.6 percent from November 2010 and 7.3 percent from December 2009.
Production index: The December index, at 197, increased 2.1 percent from last month and 8.8 percent from last year. Prices are higher in December for complete feeds, feeder cattle, feed grains, and nitrogen.
Feed: The December index, at 214, increased 5.4 percent from November and 18 percent from last December. Since November, prices are higher for complete feeds, feed grains, supplements, concentrates, and hay & forages.
Livestock and poultry: The December index, at 140, increased 4.5 percent from last month and 23 percent from last year. Since November, prices are higher for feeder cattle and feeder pigs. The December feeder cattle price, at $118.20 per cwt, is up $4.60 from the November price. December feeder pigs averaged $149.00 per cwt, up $20.00 from November.
Fertilizer: The December index, at 273, is up 4.2 percent from November and is 19 percent above December a year ago. Since November, prices are higher for nitrogen, potash & phosphate, and mixed fertilizer.
Chemicals: The December index, at 147, increased 0.7 percent from November but decreased 7.5 percent from last December. Compared with last month, prices for herbicides, insecticides, and fungicides/other are all higher.
Fuels: The December index, at 305, is up 2.7 percent from a month earlier and is 16 percent above December 2009. Compared with last month, prices are higher for diesel, gasoline, and LP gas.
Machinery: The December index, at 233, increased 0.9 percent from November and is 3.6 percent above last December. Compared with last month, self-propelled machinery, tractors, and other machinery are all higher.
B) Prices Received by Farmers:
All Products, Livestock and All Crops.
Note the Bernanke signal following the earlier $200-a-barrel-oil crazy Wall Street signal.
Grains are like oil - they tell you where the system is headed.
It's, er, headed up. Very quickly. The Bernank hath struck, and he hath struck a mighty blow.
Because this is the category with the most flux on the consumer side, the proteins tell you whether there is a consumer-side wall. Look at those poultry and egg prices.
WALL. Consumers restrict meat purchases but compensate somewhat with beans, eggs and dairy when they are broke.
A lot of consumers are broke.
C) Now integrate that with the last few posts showing that over 40% of consumers next year will have less (higher taxes, constrained or reduced nominal incomes) money to live on. Remember that the SS recipients haven't received an increase in two years. You can throw them all in the barrel with that bottom 40% of earners who got a federal tax increase. And most people are paying higher local fees and taxes.
Sooner or later, my schedule will slacken and then I'll lay out for you the consequences. If DC could have acted like human beings and passed a fiscal stimulus that put some more in the bottom of the income barrel, perhaps the Fed's desperate attempt to kick the system into higher gear might have worked. But with the bottom 50% in trouble, don't expect to see a wave exuberance sweep through the economy. When prices go up for producers but prices cannot go up for consumers (consumers have to restrict purchases because of higher prices), production goes DOWN.
There is little slack left in grocery store margins, so the farm prices are going to start showing up on the store shelves. When I don't know, because what I have seen in the last two weeks are falling prices on the discounted side (most prices higher, but loss leader discounts to retain and increase price-sensitive customers).
PS: Good reading courtesy of Carl at NoFP. WaPo takes a bit of a critical look at financial reform:
Take, for example, the resolution/seizure authority of Title II, ostensibly designed to end bailouts and "too big to fail" risks. The Treasury can petition federal district courts to seize not only banks that enjoy government support but any non-bank financial institution that the government thinks is in danger of default and could, in turn, pose a risk to U.S. financial stability. If the entity resists seizure, the petition proceedings go secret, with a federal district judge given 24 hours to decide "on a strictly confidential basis" whether to allow receivership.This appears to have been designed to deal with investment banks (not regulated by any agency except the SEC), but the way the law is written anything could be seized. It's all Chavez, all the time. Under this law, the feds could seize a department store chain that offers credit, or a car dealership, or any number of businesses. It is an invitation to overreach.
There is no stay pending judicial review. That review is in any event limited to the question of the entity's soundness - not whether a default would pose a risk to financial stability or otherwise violate the statute.
But we Americans can rest easy, because our Feeral Government would never-never-never overreach, now, would they???
(Feeral was a typo for Federal, but I think I'll just leave it as-is. "The Feral Government" has a certain ring to it, don't you think?)
PS- word verif - "gloon"
A conflation of "gloom" and "soon", perhaps ?
Yep, that probably sums up the attitude of many right now.
I still cannot get over that tax deal. "The beatings will continue until morale improves."
printing. Asset prices will fall in real terms but not
much more in inflation adjusted dollars.
Read this and get out your BP medicine:
Wouldn't this be a good idea?
http://www.americanthinker.com/blog/2010/12/manmade_famine_in_america.html (and the boyfriend even posted this link in Facebook - could it be that I'm bringing out the capitalist side of him?)
It's so hard for me to believe that could ruin that part of California. I used to live in the San Joaquin Valley, back in the 70s. You can grow almost anything there. For some reason, we never bothered to teach people in this country how rare good farmland is. People will do everything to protect some rocky, near soilless piece of ground because Doug Fir will grow there, yet allow paving and building on the richest farmland out there. I guess, when it starts to impact the price of organic food, they'll start to notice.
We had a bank asset problem - too many loans were likely not to be repaid. Stimulus ain't such a good idea, but if stimulus it must be, then the proper stimulus is to stimulate at the grass roots level so that the loans have a better chance of being repaid. Instead, all the stimulus goes to the lenders who get to pretend for a couple years that the loans will get paid back AND get to invest the pretend profits in things they normally don't deal in just to have money left when the pretending stops.
It's like stimulating an orange grove with orange paint instead of fertilizer. The trees are all going to die, but the careless farmer was given a free entry into a new line of business.
Of course, it all started with "stimulating home ownership" amongst people with questionable employment prospects. We're a nation of junkies.
The consensus among the farmers was that when all is said and done, input prices and output prices are going to be a wash for grains, with margins steady or slightly down. All of them took the Bernanke windfall of the last few years and either paid down debt or bought capital equipment that directly reduces operating costs (such as on-premises grain bins or implements with lower operating costs), so they figure on weathering the storm. They've been taking high prices as a chance to batten down the hatches in the Midwest.
This is all grain farmers. In the last 15 years everybody smaller than ginormous has gotten out of hogs and cattle (and some of these folks were considered ginormous 20 years ago). Poultry is different, the smaller poultry farms may be really hurting but it's been a long time since I had any contact with that sector.
I have fantastic news from Mark Zandi.
The USA is not screwed! Woohoo!
There was one small disclaimer of course. It is apparently only valid "as long as we make those adjustments within the next few years".