11-30-2012 06:53 AM - edited 11-30-2012 03:12 PM
At the close:
The March futures corn contract settled 6 cents lower at $7.52. Jan. soybean futures contract closed 9 cents lower at $14.38. March wheat futures finished 22 cents lower at $8.63 per bushel. The Jan. soyoil futures contract finished $0.38 lower at $49.74. The Jan. soymeal futures contract finished $0.90 per short ton lower at $434.90.
In the outside markets, the NYMEX crude oil is $0.83 per barrel higher, the dollar is lower and the Dow Jones Industrials are 6 points higher.
At mid-session, the March futures corn contract is trading 7 cents lower at $7.51. Jan. soybean futures contract is trading 14 cents lower at $14.33. March wheat futures are trading 19 cents lower at $8.66per bushel. The Jan. soyoil futures contract is trading $0.51 lower at $49.61. The Jan. soymeal futures contract is trading $3.70 per short ton lower at $432.10.
In the outside markets, the NYMEX crude oil is $0.21 per barrel higher, the dollar is lower and the Dow Jones Industrials are 17 points lower.
One analyst says the lower markets seem to be mostly speculators selling.
"I see little producer-selling anywhere. But, with today being the 'first notice day' for Dec. corn, wheat and oat deliveries, we are seeing more come in than expected. It's the end of the month. So, the funds and some big specs are getting out for these reasons," he says. Also, there may be a little selling from Brazil with the Real falling, but not a lot, he says.
"Given the volatility, I am a little quiet. I think this is mostly a long liquidation play and not so much based on fundamentals. No demand news to speak of and not much offer either," he says.
The CME just released this announcement. Is anyone affected by this? The press release states:
CME Group issued an erroneous Deliverable Commodities Under Registration Report shortly after 4 p.m., CST showing 164 wheat shipping certificates registered. That number did not include 2,000 registered wheat shipping certificates from the Andersons' Conant and Illinois Facilities. CME Group corrected the report on its Website at 5:46 p.m., CST. The company will assume responsibility for actual losses associated with this reporting error. CME Group will establish a claims process for customers and details will be posted to the Website as soon as possible. In the meantime, customers can contact CME Group Market Regulation at 312-435-3658 or 312-341-7757 with any questions.
At the open:
At the open, the March futures corn contract is trading 1 cent lower at $7.57. Jan. soybean futures contract is trading 8 cents lower at $14.40. March wheat futures are trading 5 cents lower at $8.80 per bushel. The Jan. soyoil futures contract is trading $0.13 lower at $49.99. The Jan. soymeal futures contract is trading $2.20 per short ton lower at $433.60.
In the outside markets, the NYMEX crude oil is $0.24 per barrel higher, the dollar is lower and the Dow Jones Industrials are 14 points higher.
Here's the latest from Argentina. My source in Rosario, Argentina says rain-delayed planting threatens soybean yields. "I'm saying that the area used by each farmer to plant soybeans is still 17% unplanted, due to excess rain. This crop will need to be planted in the next few days. If it isn't , it would lose and therefore would continue losing yield potential. The latest estimate has Argentina producing 55mt of soybeans."
No fresh export sales reported Friday.
--International Grains Council Friday raised its 2012-13 global soybean output estimate 12% to 267 millon tons.
--China's record grain output is estimated at 589 mmt, up 3.2% vs. 2011. Of that total corn production is pegged at 208.1 mmt, up 15 mmt vs. 2011 and up 8.0 mmt vs. the USDA's latest estimate. China's wheat output is pegged at 120.0 mmt, up 3.0 mmt vs. a year ago.
Early calls: Corn 1-2 cents lower, soybeans 7-9 cents lower, and wheat 6-8 cents lower.
Overnight grain, soybean markets=Trading lower.
Crude Oil=$0.10 per barrel higher.
Wall Street=Seen opening higher with the U.S. budget talks in focus. Also, a number of economic reports will be released today.
World=Asia/Pacific stocks are higher, and Europe's stocks are higher.
More in a minute,
11-30-2012 08:08 AM
I'd like to see some political and academic discussion of China's strategic thinking on grain production. For example, to what extent and in what ways is China investing in South America (as Japan did in the 1970's)? What is the timetable for those investments to make an impact? Does it depend on infrastructure? Political stability?
Is the world population and demand growing at a faster pace than food science and infrastructure can meet it? In other words, where are we in the food secruity curve?
And how does this affect markets in the near and longer term?
I guess for now, I just plug along as I have been,doing the best I can from week to month to year.
11-30-2012 08:42 AM
Excellent questions, Jim. Friends of mine have travelled to Brazil and stated that the railroads are under constant improvement but Brazil has been talking about infrastructure improvement for decades. High grain prices could motivate both parties to come together to accelerate the process. If in fact Brazil could expand acres due to lower transportation costs would the high land prices of today justify selling? I know this won't happen overnight but it still sounds like trucks haul beans down a dirt road. China looks they've got the capacity to do anything.
11-30-2012 09:10 AM
Jim Meade/Iowa City,
I tapped an intellectual floor trader on your China thoughts. Here are his thoughts, in his own words:
World population does not affect food demand beyond a 1 to 2% increase per year. You see it in wheat demand which is incremental. Supply-side is weather-driven year-in-and-year-out. If we say US exports for wheat are up, it's only because someone somewhere in the world had a bad crop.
Food security is a function of government policy not aggregate crop supplies per se. In other words, after the end of the cold war in (1991) and China’s successful ascension into WTO, countries were more willing to de-stock grain reserves with the notion that they could trade themselves out of any near term shortage.
China destocked corn reserves in the early 2001-2006, and the US government ended govt’s stored stocks after the 1996 'freedom to farm act' that set the world on course for lower reserve stocks.
As far as China, it is securing Joint Venture and Gov’t to Gov’t deals to grow, process and transport all commodities whether it's copper or corn. China has recently made initiatives to accept GMO imports and seed….and have an internal support price for domestic crops to support and encourage crop production internally. But, they are import dependent and that is not going to change. China also has water issues that limits expansion within its borders. Also, other government’s are becoming leery of doing deals and the gov’t to gov’t appropriation of land and mineral rights is slowing.
The shot across the bow to China and other countries, like Egypt that are import dependent, is the US, Malaysia, and EU’s embrace of bio-fuels. This has sapped up excess supplies and have raised the food security question.
When George Bush, in 1997, announced the ethanol mandate, he basically said we are going to switch the equivalent of 25 million acres of production to corn in the US. What has happened is that we have moved 15 million acres to corn, borrowing from other crop lands and we lost 10 million acres of market share to other countries (think DDG, feed grains, feed wheat, palm oil), like Indonesia, Malaysia. And more importantly for the grain markets, the FSU and Brazil, have seen tremendous growth.
As the ethanol mandates mature and demand growth slows vis a via the end of mandate expansion, we will find that our place in the World as an exporter has been displaced by other countries. It’s a double- edged sword. If crop supplies grow burdensome, fuel markets have the ability to burn off excess stocks quicker than a more traditional demand base could have in the past. But, with normal weather and maturing mandates, we are more susceptible to set back in prices than we have been in the last 5 years.
The good news is that all the new lands in Brazil and FSU come with a high cost of transportation. So, low prices tend to shut down growth in production there rather quickly. in that event, traditional producers in southern Brazil and US see some comparative advantage. As fuel price volatility becomes more embedded in grain prices, I assume this means more price volatility," he says.
Jim, I hope this furthers your thoughts on this topic.
11-30-2012 09:24 AM - edited 11-30-2012 09:25 AM
or to sum it up.........rate of gain is 1-2%..........however that figure is likely to increase some in the coming decades.........and when compounded gets outta control...........
we got rid of national grain reserves, but replaced ours with ethanol.............we could go dim in ethanol at the flip of the switch.........and it wouldnt cost the government that much money and it frees up a lot of corn and/or ground quick..........
yes, other countries have stepped up a bit...........not a big deal..........
China is always going to import..........WATER being number one..........
the low hanging production fruit is plucked...........prices fall too far and 10's of MILLIONS of acres disappear overnight.............
PEAK CORN ANYONE..........
just think guys........when this is all history you can say..........I knew a guy...........
11-30-2012 09:29 AM
I read everything that Mike responded to your question. Good insight. I have a different thought on it. If the world ever gets back to a more normal production phase, I mean no hiccups in the major crop growing area's there isn't enough bins to hold this corn. ethanol can only grind so fast. The seed companies have made great strides in seed development. drought genes, drought tolerance.
One thing that wasn't mention was that world demand for food is driven by increase in incomes, more of the population moving to the middle class etc, when the world economy slows, or interest rates go back up this will slow the growth of the worlds middle class.
All that being said China CAN NOT feed itself, I have had a buddy of mine go over there for his company, he said you really don't understand it unless you see it.
China has a new air craft carrie and is expanding its military, Just keep that in the back of your mind.
11-30-2012 09:29 AM
MT-- I am interested in your comment about acres disappearing with low prices. I would have thought that once high prices brought land into production in Brazil and the Ukraine that those acres will be planted from then on. We saw this with soybean prices building the infrastructure in South America in the 1980s. You think this increase area will go idle if price normalize to $4.00 corn?
11-30-2012 10:16 AM - edited 11-30-2012 10:17 AM
The one thing I disagree on is the terminating of the "grain reserve" as voluntary.
These things ended as much as anything because there was demand and short crops due to weather. Also the monetary cost was killing the budgets.
The last few years has seen more middle income increases in places other than here and a corresponding increase in type and quantity of diet. This equalls more meat protein and more grain use. So there has been a greater than 1 or 2% increase in usage at the same time the worlds environment has probably gotten back to a more usual or normal pattern for it's self.
The last 40 years has been more abnormal than usual, BUT many assumed it was static and not just a concequence of the normal flux of change.
If average to good world weather shows up for even two years in a row there will be a grain
reserve. The farmers of the world will produce piles in the streets with average weather world wide. We are 15 to 20 years minimum from peak grains with decent weather.
11-30-2012 10:36 AM
And here's another thought from the same floor trader, regarding China. Jim, has sparked quite the conversation this morning.
"One more thing. A lot of people tend to look at 7.0 billion people and wonder how we can feed them all. The truth is 5.0 billion are subsistent… and are very efficient in their calorie intake. They never could afford $1.90 corn and certainly can’t afford $7.00 corn.
The textile plant in Bangladesh that burnt down this week, killing 100+ workers, was paying 17 cents an hour. The real driver of food demand is GDP growth. In Russia, when the Soviet Union collapsed and they went into a severe depression, meat consumption rates went from 60 lbs a year per capital to 30 lbs. We will never run out of food. I did a talk with a big fertilizer company, to an investment group, and they kept asking me about corn prices and acres, when in realty a significant share of their fertilizer production is lawn care and golf courses. And I am sure it's high margin. So, until we start planting vegetables in the median strip along I-80, I am not too concerned. Another way to look at is that modern agriculture feeds the developed world, the rest of the population it's something else. The misnomer is that the US farmer is the most productive in the world. That’s true, per man hour, but, not per dollar spent or per acre. The squat peasant humping over his 1-1./2 acres in a rice field or squash patch is most likely more efficient in total calories per acre," he says.