07-01-2013 11:08 AM
Knowing that the USDA estimates that there is almost enough corn to get the USA to those 14 billion bushels of new crop corn supplies must be like a guy walking across the desert....down to a few gulps of water , but knowing that just ahead , a few days of hard travel...is that oasis of palm trees and water.
I have seen holders of old crop refuse to sell...either for tax reasons....through stubbornness....sometimes they are just ornery.
What if the 2.6 billion bushels stays in the bins unless the endusers raise the bid to $8 again?
07-01-2013 12:22 PM
There is never a time that the entire inventory is sold. A certain fraction can be in estate situations - more than you might think. If you're a farmer and are this far into the year and still have an Ace in the Hole why not play it?
Price will move to get grain but basis will do the heavy lifting most likely - because Chicago is fixated on the oasis. They might make more money on a real physical contract but they do not want real world responsibilities and logistical costs. They need instant gratification and milliseconds work.
07-01-2013 12:49 PM
Well, Red, let's remember that about 800 myn of that 2.845 byn corn that was on-hand on June 1 has already worked it's way into the market channels......
We have this theory about corn origination in situations like this.....It is called "what would you pay for that last half gallon of gasoline"......imagine you are on dark road and 10 miles from the nearest gas station at 10 below zero.....and running out of gas.....you see a farmer's light on in the distance, and believe you can buy some gas from him......he wants to be compensated for getting up in the middle of the night and says "I will sell you gas for $20 per gallon"
Do you buy a tankful since you are just 10 miles away from $4 gas at the pump??
Or do you buy a gallon or less??
That is what this is all about......
Keep an eye on those extra corn acres in the south......a lot of that corn can hit the MIss river system and start working it's way north in August and early September.....
although it will be rough for the user, there is not as much sand left in the hour glass as many think.....
07-01-2013 12:55 PM
BTW, I haven't paid a lot of attention but what kind of yields are being reported on SRW?
It is hard to tell what is actually being paid on either old corn or new wheat but it looks to me like if published bida are any guide, there isn't any reason for a grain of wheat to hit the bottom of a bin- just ship it straight to the feedmill.
That also might make for an interesting hedged basis play on wheat but for the most part corn belt farmers don't like to carry wheat- it is harder to keep and if there is a good basis move it is almost always after corn harvest- the market doesn't seem to want to pay you twice for the use of the bin.
07-01-2013 04:39 PM
My contention has always been----------- no one wants the last gallon of "gas". They might give it away with the new pair of shoes, but who cares about the last 20 miles if we are walking anyway after that.
By the time we are down to a pipeling sucking air, end users will have figured how they are going to adjust and have already done it. If shutting down for a while is in the future why over pay to stay in business and loose money for one more month. Shut down and wait for supply. When supply is unreliable it is not good for anyone.
07-01-2013 06:10 PM
Unreliable and unavailable are two different animals. Besides, the USDA says that there is plenty of supply. I certainly understand that some end users will not pay up for that remaining supply......but the supply is certainly not unreliable.