12-12-2012 10:23 AM
Year-in-review stories are starting to flow in. I normally don't post full length 'things'. But, here's a marketwatcher's (Teucrium Trading LLC) 'look back' and 'look ahead' that says world demand for corn, soybeans and wheat has outgrown the planet's supplies. In the final paragraph, notice what this means for outside investors considering their participation into the ags.
"As agricultural commodities go, 2012 was not just the usual story of supply, demand and weather. It was a story of a deep and prolonged United States drought that brought sharpened focus to the nation’s food supply. Indeed, it was a year that brought increased awareness to the fact that basic agricultural production, even in our own backyard, is dependent on the vagaries of weather.
US Impact on Global Markets
The USDA estimates that corn yield per acre in the United States will fall for the third year in a row, a situation which is unprecedented going all the way back to 1960, and contributed to a projected global corn production level that may actually be below global demand. The resulting decline in projected ending U.S. corn inventories could leave the nation with less than six percent of annual demand on hand as a cushion.
Soybeans, similarly affected by the drought, face an even tighter potential supply situation, with just above four percent of annual usage on hand based upon projected U.S. ending stocks. Although this supply level is not entirely unprecedented in recent years with the situation this tight in 2003, it is a margin that does not leave much room for error.
The U.S. is the world's largest exporter of both corn and soybeans, producing almost 30% of the global corn and soybeans and almost 10% of the global wheat supply – so the weather here impacts supplies around the world. The supply challenges here in the U.S., coupled with relatively inelastic global demand, have produced a situation where projected demand for these three core agricultural products will be greater than we, as a planet, can produce this year. This could be the case for the third year running.
Core Agricultural Products and the Growing Population
Global demand for the three core global agricultural products - corn, soybeans and wheat – is driven by a growing global population, a population increasing by about 2.37 people every second or approximately 75 million people per year; and a population seeking a higher-caloric, protein-based diet requiring feed grains as a basic ingredient.
Impact on Teucrium Funds
For Teucrium, the year 2012 drove home the simple truth that a steadily growing global population, with an increasing reliance on grains for a variety of essential uses, can further focus professional and individual investors alike on agricultural commodities as core portfolio holdings. With this in mind, Teucrium launched in March 2012 its core agricultural index basket, the Teucrium Agricultural Fund (NYSE: TAGS) which equally weights its holdings in four Teucrium funds – CORN, SOYB, WEAT and CANE (the Teucrium Sugar Fund.)
12-12-2012 10:28 AM
So.......266 MMT is about 10 million bushels for a month...and the s/d projection was for 100 million bushels for a year??
What's the problem??
Maybe it's time to realize we are in a global market and that means grain moves both ways under tight supply conditions.
12-12-2012 10:51 AM
I Agree with you a 100 % Ray on the globe deal , My point was that from what I read it looks like Nov. and Dec will follow suit as Oct. then were up to 30 or 40 Mil. . then comes the USDA report for Jan , and -- this is just me thinking out loud here , it will show lower harvested acres but will show a higher carry -- because of a lack of exports , price stays firm but it won't be the run up as some hoped to see .
And Mike -- thanks for the artical -- but it's more like kicking the can down the road thing , we are short on crop but S.A. has some , so people go there for there needs then it's back to us next fall , the only bad thing , if we have another short crop or something happens down south , then a big Mac truck runs over the can .
12-12-2012 10:57 AM
Here is today's report on ethanol production. This one is for the bears. Are we looking at demand destruction here?
The following is from the Renewable Fuels Association:
According to EIA data, ethanol production averaged 824,000 barrels per day (b/d) – or 34.61 million gallons daily. That is down 11,000 b/d from the week before. The four week average for ethanol production stood at 818,000 b/d for an annualized rate of 12.54 billion gallons.
Stocks of ethanol stood at an even 20 million barrels. That is a 3.6% increase from last week and the highest level of stocks since the last week of June.
Imports of ethanol showed 12,000 b/d, down significantly from last week.
Gasoline demand for the week averaged 356.5 million gallons daily.
Expressed as a percentage of daily gasoline demand, daily ethanol production was 9.71%.
On the co-products side, ethanol producers were using 12.494 million bushels of corn to produce ethanol and 91,961 metric tons of livestock feed, 81,984 metric tons of which were distillers grains. The rest is comprised of corn gluten feed and corn gluten meal. Additionally, ethanol producers were providing 4.29 million pounds of corn oil daily.
12-12-2012 12:10 PM
Doesn't sound like demand destruction, but simply alot of stocks on hand, and production replenishing at about the rate of usage.