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07-10-2012 03:08 PM
Those are the key numbers to take away from this afternoon's CME Group pre-report press briefing. Here's more from the analysts' remarks. One thing that surprised me: Soil mosture levels are at their lowest levels since 1895. WOW! Anyway, here's more. What do you think? To the moon tomorrow?
Dan Basse, AgResource Company president
Terry Roggensack, Hightower Report founding principal
Anxiety in '88 was the same as it is today. We have half the carryover supplies we had in '88, so it's much different. So, we get a real understanding of what's happened the last 3 weeks, why corn are up $1.30-1.40 and why soybeans up $2.00 and why this fuel vs. food debate gets back into the discussion. June avg. U.S. temperature ended up being 71 degrees. In the last 10 days, 8 of those have had record high temps, and those really battered the crops. So, it's the combination of extreme heat and dryness that has really gotten us. The soil moisture profile is at the lowest since 1895. Total June midwest precip was only 2.3 inches, the driest since '88 and second-driest since the Dust Bowl year of 1936. That's a combination that's caused crops to deteriorate fairly quickly. Good to excellent corn has gone down 8% each week since first of June. First time it's ever happened. We see the U.S. corn yield today between 141 and 144 bu/ac and soybeans between 37-38 bu/acre.
Loss of crop is largest I've ever seen in this period of time: 2.5 billion bush corn, 300 million bushels soybeans. Even in '88, there was not this dramatic change in such short period of time. We had crop declines in '88 in corn of 30%, and market today is expecting 10% decline, around 147. We think USDA will say 149 to 152. If this is truly a drought year and we're talking 20% yield decline, that puts yield at 130 to 132 per acre. That is a catastrophe, then we get into this debate of rationing demand. Now, we're looking at something an under-12-billion-bushel crop. We are finding fields in Indiana and Illinois today that we think will yield nothing. Sharp contract from last couple of years where saw some declines but nothing like this.
Soybeans -- 36-37 bu. Should be blooming 2 weeks from now. So, the next few weeks very critical heading into pod formation. To make matters worse, looking around globe,there are problems in Russia, India...globally speaking, we now have world consuming more grain than we can produce this year, so we will have higher prices. We worry that Russian government could ban exports like they did in 2010 if prices rise too high. Back-to-back droughts is historically unprecedented. Soybean and corn market looks to stay at extremely high price levels in months to come.
Really don't know how high is high. We know that 140 bu/corn is critical. We will have to shut down ethanol mandate if it gets below that. We know 7 or 8 dollar corn hasn't changed the mandate in the past. I don't know what price level will ration demand from China. This is a very critical market right now. Tightest supply that I've seen in my 32 year career. If weather patterns don't change in next few weeks, marketplace will be looking at sharply higher food prices.
You can envision 8-9 corn prices and 17-19 dollar soybeans. Seemed unprecedented a few years ago.
We looked at in the last 41 years, had 6 diff. years where either heat or lack of moisture were key factors to drive down yield in corn and soybeans more than 10% below the 10-year average trend yield. In 6 of those 41 years we looked at, if we convert the old yields back up to where they'd be now as a percentage below trend yields, corn yields would come in between 114 to 140.6 bushels/acre.
If we get anything below 140 bushel yeield, which is only down 10% from 10-year trend, we have a real problem on our hands, and messages from the field all over IN and IL that are really suffering, 12% of corn crop in the country is in very poor condition. In traditional times, we look at the very poor rating as very close to being plowed under. 12% of crop is 11 million acres on verge of being plowed under. We're in a position where if we just look at 6 of the last 41 years with poor weather, soil moisture conditions are worst we've ever seen and temperatures are some of the highest we've ever seen heading into pollination.
07-10-2012 03:21 PM
Those are a couple of pretty smart guys........I think I'll lock the bin doors. What neither said was that in 1988, we started getting rain around the 17th of July and saved some of the crops........If that doesn't happen this year, we might just keep going past the moon.
07-10-2012 04:16 PM
Can't believe these guys can try and talk about what price corn rationing takes place with talking about the price of oil. If we rationed last time at $8 corn and oil was $145 what price will it take this time with oil at $83?
07-10-2012 04:22 PM
Global warming. Even if partly true, it is mostly about a few making big bucks off the fear.
So was it global warming in the 30's that caused the dust bowl? What about the seven years of famine in Egypt with Joseph? I suppose camel gas was the problem back then...7 years of drought and the camels died and then it started raining again. Weather changes, that is a fact. I don't think global warming affects sun spots last I knew.
Seven years of famine, heck we might call 2012 a bin buster.
07-10-2012 04:25 PM - edited 07-10-2012 04:35 PM
Think more like maybe 134 corn on 82 to 84 harvested ( unless h2o pattern changes it will NOT avg 134 btw ).
The lack of hygroscopic ( subsoil h2o ) which is all used up where corn looks good is an issue. ( can work out to sd problems where a good plant just gives up ).
This deal stays dry in the N ( that 200 bu N avg in the good areas is more like 180 today...if that ) and National Corn Crop avg may be closer to 100 bu p acre than most of us care to face at this time.
( the S cb is shot , ie S cb may avg 85 bu if lucky, and if the N does not carry some decent yields the whole avg goes in the tank )
Cash corn be in the $8 to $10 range for a long time now ( previous crumby basis areas ).
Cash Beans be $16 to $21 ( also previous crumby basis areas ).
The afore are not unreasonable prices at all considering the real World economy ( just because the western world supposed econ is really not much of an econ, does not mean 6 billion other folks in sa or the pac basin are in the same boat )
Times change ( we're going to have to adapt some ).
This dry has a 12 year history, and tends to move N.
It should eventually cycle out of the N country by about 2016.
07-10-2012 04:26 PM
Kstater, we may just find out what happens. Or, hopefully it starts raining and the super heat stays away and we don't go all the way down that road.
Didn't see anyone from government step in when the price of seed when up 300 to 400%? Or fertilizer went from 150 bucks a ton (NH3) to 1000 bucks?
Besides, no worries, we can just get all the corn we need from Brazil.
Deer in the headlights. Rain has always bailed us out. SOS for a few hurricanes.
07-10-2012 04:33 PM
What is Jeff Caldwell, Mizzou Tiger`s long lost twin brother...WoW! Let`s say someone contracted new crop beans for $13.23 @ 10bu/acre, would it be a dumb thing to buy a $18 bean call to cover that stupid person`s butt in case things really get wild here? The media is running stories on burning up crops, priming folks to be ready to pay up at the supermarket.
07-10-2012 04:45 PM
Hey, now, BA! Easy on the B-Team! I'm just the messenger! Ha! Seriously, though, think they're off a bit, then? What do you think are closer numbers?