Why not just buy puts?

Why not just buy putsMichael Swanson, Ph.D., Wells Fargo Chief Agricultural Economist

With the 2016 harvest in the bin (or grain pile), many agricultural producers thoughts have turned to preparing for 2017 and committing themselves to land rents and inputs purchases. In a recent publication, the USDA showed that more than 60% of farm ground is rented in the key grain and oilseed regions. Using micro-data from the Center for Farm Financial Management, land rents get paid 28% of total yield on cash rent corn operations. This represents the single biggest expense for agricultural operators, almost doubling machinery expense.
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Does a record crop mean record usage?

Why not just buy putsMichael Swanson, Ph.D., Wells Fargo Chief Agricultural Economist

The September World Agricultural Supply and Demand Estimates (WASDE) report confirmed the USDA’s previous estimates for record yields in corn at 174 bushels per acre, and soybeans at 51 bushels per acre. Given the large acreage planted, the U. S. should produce 15.1 billion bushels of corn and 4.1 billion bushels of soybeans.
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True farmers never sell a rally

Magnifying GlassMichael Swanson, Ph.D., Wells Fargo Chief Agricultural Economist

One topic that never gets old for producers and processors is price volatility. Where does price volatility come from, and who is responsible? What constitutes price volatility?

Price volatility brings to mind the infamous quote of Supreme Court Justice Potter Stewart used in 1964 of “I know it when I see it”. You would think that everyone would agree on what constitutes price volatility − it’s when prices change.
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Consumer food and beverage expectations – fact or fiction?

consumer foodMichael Swanson, Ph.D., Wells Fargo Chief Agricultural Economist

Story telling almost always overwhelms factual analysis since most people find it easier to remember a good story than to remember a good model and factual analysis.

While a good story can be true, and it can give us a clear insight into a complex issue, unfortunately, too many good stories are “just so” stories that edit the facts to fit the outcome.
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Blog: Be careful what you wish for

becareful-what-you-wish-forMichael Swanson, Ph.D., Wells Fargo Chief Agricultural Economist

The drop in crude oil prices has acted as both a symptom and a cause in the agricultural economic outlook. According to the Baker Hughes rig count, only 571 active rigs were working in February 2016, down an astounding 71% in 18 months. Since drilling activity peaked in September 2014, crude oil production has risen by 5% highlighting the lag in the energy production system loop. (more…)


Blog: The who and what of farm financial stress

Michael Swanson, Ph.D., Wells Fargo Chief Agricultural Economist

Even with the recent rally in corn prices, grain and oilseed producers still face break-even or losses in most circumstances. This prompts the questions of how long will it be before the sector enters a financial stress mode. (more…)


Blog: How far is the land market from its real value?

Michael Swanson, Ph.D., Wells Fargo Chief Agricultural Economist

The single most important asset in agriculture is land, and the single most vexing question in agriculture is what land is worth. For agricultural producers, land values incorporate many things that fall outside the cold-hearted economist’s model. (more…)