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07-09-2013 01:46 AM
From here on out the dominoes fall one direction or another and determine the market outcome in a way that will be more clear. Almost all ag situations in the N Hemisphere are now moving in definite directions. In fairness, a strong weather market in the Midwest would have a huge impact.
China has decided to raise it's domestic support for corn to " $362-369 a tonne, or about $9.20-9.40 a bushel, well above world market values" according to an article in Agrimoney. This will be what the national reserve will pay for corn bought for government reserves. This is about what they've been paying for corn off the West Coast the last few years anyway.
However, this raises questions about the difference in Chicago's outlook vs China's reality. And they can encourage/maintain production at home and do more than break even on imports of foreign corn. Clearly they aren't as confident as Chicago that the world will be 'awash' in corn. Or wheat either, considering thier recent big purchases.
China hasn't and won't back off on pork production for any reason. They have been absolutely consistent in their food policies with no looking back. They still have the hammer down and it won't change.
I think China has a very different view of global grain production than we do. They leave no stone unturned and no opportunity goes to waste regarding food policy. I mention China because they are the most convenient example but other importing countries are probably similar. I think it would be fair to ask what they think they know vs what 'we' think we know as reflected by Chicago. I'll qualify that by reminding us that Chicago is paper and importers buy physical for reasons that go beyond trying to make a few pennies/bu turning it over.
Now we start having fun marketing.
07-09-2013 04:34 AM
The traders in Chicago are very complacent. But, they are basing their entire trading ideas on the USDA's overzealous predictions of both acres planted and predicted yield.....They are not projecting anything....their numbers are just guesses. Not sure why the traders give the USDA so much credibility......they are about to get burned.
The American people are also complacent about the nation's food supply. Many think that it magically appears on the store shelves. It must be because the USDA makes corn, soybean and wheat supplies magically appear from one prediction to another.
What the USDA puts out are not reports...they are simply predictions of what they want to see.
True reports would actually be counting the supply of a certain crop. Not predicting the future.
07-09-2013 05:03 AM
07-09-2013 07:41 AM
I would agree that the coming landing in China (hard or soft?) probably affects food the least and unless it is very hard, not much at all.
Although it will probably create some headwinds as the broad commodity complex struggles under the weight of the huge bets that were made with other people's (dumb) money a few years back.
Can't have it both ways boys, the tide of money ebbs and flows and when you have a tidal wave the backwash is pretty big too.
07-09-2013 11:34 AM
"Though China's grain self-sufficiency rate has dropped below 90%, it does not mean the country's food security is endangered, said Mei Xinyu, a researcher with the Chinese Academy of International Trade and Economic Cooperation at the Ministry of Commerce.
"In 2012, China's grain output rose for a ninth consecutive year to a record high of 589.57 million tons. Growing yields, however, did not rein in surging imports. Because the nation's total grain imports also hit a historic high of more than 70 million tons in 2012, China's grain self-sufficiency rate has dropped below 90%. .......
"One thing we should not ignore, Mei said, is the increased demand for feed. From 2003 to 2012, China's meat production rose from 64.43 million tons to 83.87 million tons, while milk production increased from 18.48 million tons to 38.68 million tons. Consumption of eggs and poultry has also surged."
07-11-2013 12:10 AM
From what little I know of it, it looks like China keeps trying to vertically integrate their food supply as a national security strategy. At least their marketing actions are consistent with that approach.