04-22-2011 06:31 AM
With the markets closed for the next three days and much of the U.S. planting delayed (and it's pouring this morning in Chicago), I thought we would discuss something that so many people are whispering about.....$12 corn.
But, following your reading, I'd be interested in your individual response on this subject. Come back here and offer up your reaction, if you would please. Thanks. Mike
04-22-2011 07:21 AM
I am going to test that theory. Not out of greed, because someone has to be willing to sacrifice to make sure there is some grain left late summer. (I try to make up for my lack of acres with price) Just hoping I don't end up with 4 or 5 in front of the corn number instead. Every time we raise the top price on grains, the accepted normal price becomes higher. Look at gasoline, after a couple of runs at four dollar gas, people are now complaining less at three, when for years we expected gas to have a number less than two dollars per gallon.
There looks to be a window late next week for planting around here, if the forecast holds. That would put pressure on Sunday's night trade. Seems like it should be time for a correction again. We have phantom 'dry' today. No rain on radar, but wet stuff is falling...
Great yields are still possible. The last few years MN has produced a huge crop, can they do it three years in a row?
I am becoming more and more convinced the only thing that will really set back this market is an economic blowup, and more than in the just the US.
Prayers to those in the drought and fires in TX. Regardless what the markets or weather do, the most important thing is to realize we just walk this earth a short time and we need wisdom from God to make those days count, a lesson I am still learning.
04-22-2011 07:29 AM
even tho there may be 'justification' for such price levels, the market works on the purchase at the least cost scenario.. therefore just because cattle feeders,pork producers, millers, ethanol plants and other end users can break even at such lofty grain prices they will still buy as cheaply as possible... once they can't breakeven there may be a wall develop where they exist the market either permanently (sell their stock) or shut down for a short (4 mo. to a year) period of time thus curtailing demand rather quickly... specs will run from the market at a faster pace.. therefore I don't see corn reaching such lofty levels...
04-22-2011 07:58 AM
Mike I think that 10 is certainly in the cards. all it takes is a little more percieved weather problems and a nice little drop in the dollar along with another shooting war in the middle east and we will get there. I wouldn't bet against it.
04-22-2011 09:12 AM
Perhaps it would be like 2008 when the only way for growers to take advantage would be through sale of stored old crop or if they have a monster hedge line and guts. The elevators would undoubtedly all be out of the forward market, once again.
Further, I suspect that a real deal problem and a run above the mentioned level could essentially shred our agricultural system as we know it. Feeders would simply shut down at some point. The entire grain storage complex would be completely at the mercy of the lender continuing the daily cash infusions through their hedge accounts.
After however many days of expanded limit ups, the government would have no choice but to make some sort of waiver of the ethanol mandate. At which point we would experience multiple days of expanded limit down. A perfectly hedged and perfectly financed grain or enduser operation could theoretically survive that, more realistically, most are imperfect (think Verasun).
My vision is something like the slope up Cemetary Ridge after Pickett's Charge.
Further, the number of revolutions worldwide would quickly expand from the current handful to potentially dozens- maybe some good, some bad but probably not good for a teetering global economy and heavy with further geopolitical risk.
Within this there is also probably some small potential for true systemic risk to the US economic system and thereby the global system. A lot of direct shocks to the system and more indirect- an economy that is limping along at 2% GDP growth ($300 billion of growth bought with $1600 billion of deficit) would tip over under intense food inflation.
Bottom line- better hope for a good crop like you've never hoped before. And there still is plenty of time although I know it is nerve wracking.
04-22-2011 09:21 AM
Anything is possible, what I don't understand is that why we are talking about $12 corn and we haven't even hit $8 yet. In Iowa, this new crop (not yet planted) hasn't been hurt by delayed planting yet. The day on a calendar is just a marking on a piece of paper, the conditions to plant have not been there yet....Once/IF (that is a BIG IF) we hit 8, then we can talk about 9, 10, 11, 12.
We are looking at an all time high on corn prices right now...realistically I think we will take off 1 or 2 dollars on this market before we add another 1 or 2 The only thing that I know right now is that at some point we will be able to buy corn cheaper than we can produce it, this market will fall below the cost of production at some point. Whether that is within the next 3,6,12, or 18 months I do not know (Nor does anyone).
04-22-2011 01:01 PM
is a definite possibility.
I'm talking CASH corn on that too. Not Paper corn.
Might even get close to 10 cash in the minus $1 basis areas too ( bout half the corn grown is in "crumby" basis areas...so cash corn is not near as high of average price as most spin )
04-22-2011 01:22 PM
A little more food for thought. While everyone looks for scapegoats to blame for rising grain prices, maybe there is one they left out. Back in the old days...we had a grain reserve. The country saw food as a resource to treasure and value. All those years of sub two dollar corn taught us a lesson....having any excess supply was bad, bad, bad, and the market would punish the farmer accordingly. We sell and buy against our future like it is always guaranteed, I imagine some year that theory will be challenged. I would submit that the low, low grain prices were also a form of greed.....
Still plenty of time to produce a great crop, the panic buttom is several weeks away.
04-22-2011 01:58 PM
Ethanol's merits aside, the real lunacy was to embark on the very ambitious ethanol mandate timeline without first establishing a reserve to feed it.