Agricultural News
Analyst Darrell Holaday Warns Soybean Farmers to Listen to What the Market is Telling Them: STOP!
Thu, 21 Feb 2019 11:31:45 CST
Darrell Holaday, a private marketing/management consultant with Country Futures, Inc., spoke to producers this week at the All Crops Conference in Norman, Okla. hosted by Oklahoma State University Extension Cooperative Services. Focused primarily on the current dynamics of the soybean market, Holaday advised farmers on how to interpret the signals being broadcast by the marketplace and how to use that information to navigate the particularly challenging commercial environment that exists globally as a result of bulging stocks and geo-political strife. He condensed that message to farmers in a conversation with Radio Oklahoma Ag Network Associate Farm Director Carson Horn offering some of his suggested guidance. Listen to that complete conversation by clicking or tapping the LISTEN BAR below at the bottom of the page.
"Unfortunately, we've created this big monster in South America," Holaday remarked, setting the stage of the situation that is actually materializing in the soybean industry. "People don't really realize the Brazil and Argentine crop together is not twice, but 60-70 percent larger than the US crop and we're just going to have to compete as China's use of soybeans drops this year and continues to drop."
Holaday contends the recent trade tensions between the US and China have exposed America's market share to upstart competitors who have taken advantage of the circumstances to advance their own marketing opportunities. Holaday says eventually the US and China will come to terms and the relationship will return to normal. However, with increased competition and growing worldwide stocks a reality, he asserts that the US will simply need China to purchase more than in the past. With that prospect seeming to silently mount, Holaday says producers need to be paying attention to what the market is communicating to them and react accordingly.
"Price is the great communicator," he said. "I believe at some point in the next year or two if things don't change with the supplies in the world- we're going to have to get price low enough to communicate to producers they need to quit expanding soybean acres because we have enough."
When that message finally is received, though, Holaday says producers will need to plan strategically and take into account the implications that reduced soybean acres will have for the rest of the ag industry.
"If you get lower bean acres, those acres are going to go into something-" he said, implying that producers should be careful not to choose an alternative crop that might be popular and therefor equally at risk of experiencing a deflation in value. "This is why it's important to be a least cost producer in everything you do."
Considering all this - Holaday offers two pieces of advice. First, not to give up on your attempts to become a more efficient, cost-effective producer. Second, trust that the market will also present opportunities, but know when to take them. Holaday warns not to set sights too high waiting for a major rally in prices. Given the situation, he advises producers take whatever rally comes along as they look ahead in what is to come in the marketplace.
"I think it's going to go through a difficult process to tell the industry stop planting as many acres. That won't be fun," Holaday concluded bluntly. "On the other end, 18 to 20 months, we'll get out there and it'll be fine as we get the demand back and we'll be okay."
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