12-20-2013 04:25 PM
Just posted Roy Smith's new column, Big news: local basis (link). Seems like some good perspective on the corn market, including that "the outlook always looks the worst at the bottom," and that "the carry between the nearby futures and the deferred futures is large enough to offer a little storage income for those who are willing to take it."
On soy, he underlines his plan for getting sold out of old crop beans before December 31, today being a good day to get most of them priced.
What's ahead for him: "My focus for the next few weeks will be to look for opportunities to sell the carry in the corn market and to forward price some of next year’s soybeans when the opportunity is available."
12-20-2013 05:44 PM
With the utmost respect for Roy Smith, whom I greatly enjoy for this wisdom---
I was shocked to see him make the following statement in his article
It is difficult to imagine the outlook any worse than it is.
Did folks really think that $6 and up corn was the "new normal"?? Apparently so, or maybe it was the shock of going from $7+ corn to something a lot less so quickly....
What is really going on is that our ethanol policy, combined with livestock and the traditional food processing segments of the demand base have placed a pretty high percentage of corn demand (85%+?) in a pretty highly inelastic category.....which is great when supplies are tight and corn goes to $8.49 on the board.....but not so much fun when futures are half that and the market is challenged to find new demand to chew through the bulging carryout.
And here we are with beans at $13, so it is not all gloom and doom for the past year's crop...
After the 2008 runup in commodity prices, I often wondered if I would be able to recognize a bubble the next time. The only solace I can find is that a lot of other folks must be having similar issues doing the same thing.
12-20-2013 07:39 PM
There could be a corollary to your suggestion The question is - are we entering an era of 'returning to normal' (or low prices using inputs and price as a benchmark ratio) and can we repeat the relatively large yields this year? I think history suggests that the results will likely be mixed over time and might be anything in a given year.
On the other hand I think ethanol is here to stay, at least for awhile. I'm just guessing that members of Congress from largely rural areas may not find it comfortable to return home if they move to decouple ethanol from fuel given the pressure of current 'low' prices and rising auto fuel efficiency. And I think global demand will keep rising at a good clip for grain commodities for rising standards of living.
12-20-2013 10:30 PM
12-21-2013 07:58 AM
Excellent point Ray. This is hardly hard times. Not even close. Even if you ignored all the lessons of history and didn't sell anything, $4 corn and $13 beans pay all the bills plus quite a bit. Next fall when beans are $8 and corn is $3ish, then the outlook will be dire. The markets are only half way back to reality in terms of time. 27 months down after a drought high.
Nearby though, corn and beans should have a nice leg up to get everyone bullish again, right before they silde into oblivion. Wheat is a great example. Sellng the carry on the rally. Old school....but old school often is a good new idea.
Sure, cut fertilizer. Cutting P and K will have no yield impact for 3 to 5 years. Look at Calmers data for proof. No one is going to cut N for goodness sake. jmo
12-21-2013 08:47 AM