Weekly thoughts from Farmers Business Network, Inc.- Week of April 5th, 2020
On the market, I keep reiterating that this volatility is, in fact, opportunity for the long term minded. But the temptation is to play it all for quick money. That rarely works. This is one reason I like 401K accounts. You turn it on, select your investments, and every 2 weeks some of the paycheck goes in. It automatically dollar cost averages for you. Its a great tool to overcome the natural human tendancy to try to time things or overthink. I frankly never even look at my own account because doing so wouldn't do much good. I just know its playing the odds largely in my favor if I stick with the program.
Farmers face a very uncertain market. Corn prices are way down and there are a series of unusual events now that threaten the primary product of American agriculture. Of course, you have a pandemic. We know that has the impact of depressing economic activity and certainly in the short term, and perhaps in the long term, lowering demand for farm products. Secondly, you have depressed oil prices, with which corn often trades in sympathy. But you also have two huge oil nations dueling, mad at each other and at least a few players who want to use this crisis to eliminate the prospect of US sourced oil. I was told by Tom Staples that there is a prospect of negative oil prices in canada. Yes, it turns out not all oil is created equal and Canadian oil was already worth less because of its constitution and also its location. Now, its worth even less. This explains it below. What do you think that means for North Dakota oil? Corn prices?
Finally, you have a painful situation in ethanol, again related to oil prices. Ethanol is 30% of US corn consumption or thereabouts. Without it, you have destroyed significant demand and of course with oil at the price its at, there is little reason to run an ethanol plant right now (they can be idled) and so people are acting rationally. Here is an article below by Kevin Mcnew on this exact topic:
https://emergence.fbn.com/profitability/crude-oil-ethanol-implications
The one major benefit I see right now for the very long term minded farmer is the opportunity to lock in very low cost financing, for their primary asset- land. Some farmers already have great deals, but these new deals are about as good as one could ever imagine. This is why our FBN Finance business is booming. Check out the rates here, or ask Dan English for info, if you have farmers or others who might be interested.
Finally, the overall economy and stock market. It seems to me with news beating down its hard to shock the market anymore, nonetheless, you still see big moves or at least bigger than normal. I really think its now going to take earnings coming out to get a picture of the damage this pandemic has caused. But over 6M unemployment claims were filed last week, so you can bet there will be damage. The question is whether it is permanent or temporary. Once again, as always, I would bet on great American companies and their innovation. For those good businesses out there, the resilient businesses, I expect this will be temporary.
Global Head of Venture Capital Partner & Managing Director William Blair & Company
4 年Amol Deshpande this is great. Thanks for posting Ira Ehrenpreis