The Lender of Last Resort

Posted on 03/09/2017 10:21 AM

Last Friday the monthly jobs number was released. The economy added 255,000 new jobs -- a very solid number. More importantly was how the markets reacted to that number. Equity markets zoomed higher and never sold off, even commodity prices rose. Of course with prices at ridiculously low levels in commodities there is nowhere to go but up.

For farmers, the high stakes bet they make every year borrowing millions of dollars to put their crop in the ground has become more of a challenge as the ability to borrow becomes tougher and tougher. Borrowing money has become a major challenge even though we are told the money printing trickledown economics is supposed to make it easier. Based on all of the press conferences given by the Fed governors, one would think they are giving money away.

The nation's farmers and rural communities are dealing with low commodity prices while the Federal Reserve is trying to create inflation. Farmers and producers deal with the issue of higher input costs with low selling prices, not a great combination especially with higher lending costs. Financial engineering by the central banks around the globe is one of the bigger con games, Ponzi schemes ever created.

There is a bigger issue for farmers and producers besides the lowered production, higher input and borrowing costs. The problem is the way that production is reported. Every report shows a bumper crop with record yields except if you are in North and South Dakota, Kansas and other areas around the country.

Corn is being priced at yields as high as 170 bu. per acre, yet we are hearing numbers as low as 80 bu. per acre -- not a great number considering the input, labor and borrowing costs are the same. I find it troubling when reports lump everyone together proving once again that the numbers being reported like the financial engineering is a croc.

With all of this manipulation what we are really missing is free markets and true price discovery. The free market system on its own is pure. A buyer and a seller meet and exchange wealth, meeting the needs of both. What we have here is the trickledown kick the can down the road economics hoping that these problems will disappear.

Keep those stops tight!

The views, opinions and positions expressed by the author are theirs alone and do not necessarily reflect the views, opinions or positions of Pro Farmer.

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