Will the bulls get slaughtered?

[jrtheoriginal]

Well I have been real busy the past couple of days and really haven't paid as close attention as I should be to the markets. BUt yesterdays limit down move gets your attention. Yea we have buildiong stocks of american cheese but it isn't way out in left field kinda stocks. Also We know there will l be production revisions downward.

NOw I still think sometime in the next 10 months we see 30 dollar milk. However a couple of things have to happen.
1. No BIg time stimulus. In an era of inflation the consumer gets hammered and therefore they spend less. They will drastically cut back on food spendiing. That is why we saw fewer cheese slices sold. Folks ate the burger but no the cheese. No QE3 is the best of both worlds for the dairyman. Corn will stay at these levels or slightly reduce. and Cheese consumption will not fall any furthere but I also think it will even thrive.


2. New crop feed has to fully hit the rations of the dairy cow. I do believe that this years feed won't have enough zip to give us those big production gains. ALso with the tight corn supply maximum milk isn't maximum profit so it could be that these cows won't get pushed so hard.

What makes this analysis so hard is that my gut says we go higher. But everything else tells me we are in for the big selloff. I am protected thru the end of Sept. after that it is all on the open market. that could get dicey!

SO this bull isn't slaughtered but I am sure my nuts are in a vice! ( a very big one BTW)

[pldairy]

ya must have a big set there Jr to be so bullish? LMAO

how big is the vice?

[linsal]

JR---For a while, I didn't think QE3 (or some variation of it) was going to happen. I've now changed my mind. Bernanke is, IMO, of the mindset that he and the Fed Reserve can "manage" the economy. What they can manage is the monetary supply which will help the big banks and Wall Street investors (screwing the taxpayers in the process)---but that help doesn't trickle down to Main Street and create an environment where employers will start to hire people.

The big banks and investment firms are in serious trouble on all fronts---Goldman Sachs CEO has retained a big dog lawyer---S&P's CEO is leaving and being replaced by a guy from Citicorp. B of A's stock price is tanking, and I could go on and on...Bernanke is going to do what he can to save his buddies.

The chesse stocks that we see building are just the beginning of the storm I believe we're going to be facing. Consumers are scared and cutting back. Pay attention to reports coming out of Wally World---consumers are cutting back on their purchases.

I believe that the bad weather we have had this past year may be a blessing in disguise---with poorer crops available to make milk, we might be able to contain (to a degree) the damage which I believe is coming. That said, I really feel for any dairy farmer who is highly leveraged---this could be the end of the line. I can't see a banker carrying anyone much longer who is in trouble. I've had conversations recently with 3 out of my four immediate neighbors who milk cows. They all said they didn't know if they were going to make it. And this is with what are considered to be decent mail box milk prices. They all are complaining about the cost of inputs (fuel and commodity prices).

'nuff said for now.

[dman]

JR, if the consumer has to cut back, they ain't gonna buy cheese. no more pizza!! Lots and lots of cheese gets sold on pizzas. I still think this is a short term deal. Glad I do have some protection in place through June. (I'm not a permabull....I like be PROFITaBULL!!!) I said a while back that buying was strong and once the buying stopped that cheese would fall. It appears that buying has stopped. And keep in mind it was at times liek these that DFA would step in and BUY cheese...well I hope all those farmers who didn't want the evil DFA buying cheese are happy now. Still think milk has a floor under it around $17/cwt., current cheese prices work out to that.

The other thing to keep in mind is that Sept. cheese started its calculations this past Mon., and there was about a .25 or .30 difference in price between spot and futures prices. I believe they are now even.

[pldairy]

most all our milk is being powdered sense last sat, DFA has sold alot of powder just lately
cheese plants want all the milk they can get , but they arent getting it here now

[larrydc]

Guys I think that pricing oppurtunities will improve for 2012 but don't look for $20 milk. I think last quater of 11 is going down hill .
Larry

[dman]

I don't know Larry. I think $20 milk is still possible for 2012. Especially later in the year. We all have been waiting for the shoe to drop on those that need to buy all or most of their feed. $7 dollar corn does not pencil if you have to but it all. This may be the stone that brings the glass house down. I don't remember the exact numbers for each month, but my first half of 2012 avg on 25% of my milk it $17.34 less premiuims, which are on avg. $2.89. So looking at over $20 milk. BUT, more importantly have some protein needs locked in for next year......

Was at a dairy advisory meeting yesterday. The subject of feed contracting came up. The farm business management guru, said that $390/T SBM is not a good buy......I said isn't it? We could go a lot higher. Then the talk got to corn price, I said $8 is not out of the question, he laughed at me. Said that ethanol production is going to stop.....huh? I thought. He seems to think ethanol production is going to cease and there will be ooodles of corn and the price will fall.........I think I'll wait for the flying pigs to come. lol

[larrydc]

We are seeing a 20 cent over basis on corn in NE Wisconsin and that has never happened that I can remember. Yes $20 milk could happen by last quarter of 12 but I would't budget that figure.
Larry

[jrtheoriginal]

Oh great another GURU! I wonder if those guys live in the real world? BTW if you are buying corn from local elevator here this month it is effectively 8 with all the charges. ANd 390 bean meal better be bought all day long. I wonder sometimes why I shelled out all that money for college when I hear these guys talk!

Larry the thing is that for so many real dairyfarmers who buy their feed the feed costs are nearing 12 dollars a hundred! I remeber very well being able to keep feed costs at 4 bucks a hundred. On 12 dollar milk I had the same margin then as many do today! That 8 bucks won't cover all the expenses like it used to. THis is a slow motion train wreck!

BTW geting more calls about shopping down corn. That wind storm was nasty! Took 10% off the fields that got hit easy. ANd alot of corn got dinged around here.

[jrtheoriginal]

Aug 24, 2011 8:08:56 GMT -5 pldairy said:

ya must have a big set there Jr to be so bullish? LMAO

how big is the vice?

Dude that vice is ginormous! LOL

[bentover]

Jr With a set that size I see why you are behind in your work---- You can't walk---

I think the demand for ethenol will be decreased if our economy does not improve. Too many people can not afford to buy food and our tragedy in the white house will step in to reduce food costs, Even he has figured out that he can't create more jobs so he has to help the poor by lowering the prices of the essentials that people purchase

BTW Post a picture of that vice in use.

Bentover

[dman]

bent, yes ethanol demand will drop. but this "guru" seems to think that ethanol will cease! big difference.

Larry, nope not gonna budget $20. Prolly use $16 or $17 in 2012 budgets.

[jrtheoriginal]

Limit down limit up all in one week. Kinda seems like the corn market all of a sudden!

[glowplug]

The difference is while Kraft manipulates cheese prices, the USDA manipulates the crop reports. I'm lowering my corn guesstimate to 141 bu.

[jrtheoriginal]

Kraft is more ineffective at manipulation than the Gov. HA HA