01-31-2013 08:50 AM
Here is an interesting article by Prof. Emeritus Bob Wisner on the demand for our 2012 corn crop.
It's a fairly long article, but it is logical and well written so it's easy to follow and you can see if you agree or disagree wit Wisner's conclusions.
"USDA’s latest corn supply-demand information, along with quarterly historical feeding patterns and international crop estimates, show an even tighter corn supply situation than expected a few months ago. The extreme tightness is caused by last year’s U.S. drought that sharply reduced U.S. corn yields, indicators that U.S. corn feeding has not yet been rationed and was significantly larger than a year earlier, and by reduced crop production in several important foreign cropping areas. Export and ethanol demand for U.S. corn have been rationed by the higher prices, but without a large reduction in U.S. corn feed demand, corn supplies could be tighter than indicated by the already very low USDA corn carryover stocks projections. "
Wisner discusses the surprisingly high feed usage and says we'd have to have very dramatic reductions in feeding to meet USDA projections. He tells why he thinks exports will pick up and alternative feeds will be more expensive than corn.
In my opinion, this is a well written and interesting discussion and should help all of us decide how we want to market our 2012 production and maybe even 2013.
Will your conclusion after reading this be that you will hold your corn for higher prices or will you take the money right now?
01-31-2013 09:02 AM
BTW, Stu Ellis wrote his customary summarization of the Wisner report. If you would like to see his take on the issue, it is at:
01-31-2013 09:14 AM
Interesting quote......"Prices have not begun to ration those short supplies yet." Not begun yet? Wow, this could be one heck of a rally.... My bin doors shall remain shut.............for now.
01-31-2013 10:07 AM
Thank you Jim. The abacus plus's and minus's look sobering. It has seemed to me that the numbers don't add up real well on the old crop use. If the Plains states don't get a lot of rain soon, ranchers will be looking at dry-lotting their cows, which will be very painful, but might in the long run be well worth it.
01-31-2013 10:25 AM
What I gather from the local feedlots, is that they have 90% or more of their needs already booked. So far, the price ups and downs are more in the paper markets, than the local cash markets. As the markets have been fluctuating up, down, up, down, the basis moves around, so the actual cash price doesn't make near the swings.
The feedlot guys also commented that if corn prices rally, they can afford to pay quite a bit for that last little bit of corn, or can try to move cattle to slaughter early, if need be.
01-31-2013 10:52 AM
Thanks Jim .
Two things here , maybe I missed it somewhere , But they said that the cattle has to be cut back on feed , My question how do you do that ? Short of just just sending them to the yards , remember he said that everything else in feeds is getting short too .
What about DDG's ? As the ethanol crush go's down so do's DDG's , to me to make up that diff. Then corn would be feed . Did it show that DDG's was down 12.5 % from last year ? If so then thats a big number to make up .
One other thing , I don't know about you guy's out west , but here in Indiana , when we used to raise cattle , when it got cold them cattle could really put the feed away ! Seemed like that was all I did , was grinding feed , lol
01-31-2013 10:53 AM
I thnk you have brought up a good point. No one wants to be sitting on corn waiting for the price runup only to find that even if the carryout is short, no one needs it.
01-31-2013 11:11 AM
Yes, I am sitting on around 80% of my 2012 corn crop, so watch out, I am usually wrong!!!!!! No, I tell you we are sitting on farmland that is dry as a bone. My drainage tiles quit running back in the late spring of 2012. They usually always run water in the fall, but not this year. Way to early to say we will have another drought in 2013, but if we do have one similiar to 2012, and with zero subsoil moisture, I see a state-wide Iowa state corn yield of less than 120bu, perhaps as low as 110bu for an entire Iowa state corn yield. That would take off 1.5 BILLION corn bushels just off the Iowa average state-wide yield of 170 to 180bu in a normal crop year. Anyway, our basis levels are improving every week, the end users really, really, want our corn.
01-31-2013 11:34 AM
Also out in the western corn belt in 2012 there was ample soil moisture in the profile which is NONE existent today and irrigating this year for a complete growing season will be a total stretch of one's imagination --- what would an 8 - 10 billion bushel bench mark be short of total caos ---
01-31-2013 12:00 PM
this article has a more practical flavor than Mr. Good's article from last week..........and if we're going to be honest, this is not new information------JAN stocks were pretty clear about lack of rationing (etoh down, no exports, a usage # w/in a few % points of 2012 JAN stocks)
Also, I thought "booked" and physically changing hands were not same thing (correct me here).........and further, if, only 10% is left in Last couple months of mktg year, dynamics can become pretty crazy........... Put more directly, mkts do not behave in a linear fashion------10% could = 50-100% in price change (one of those log or calculus math concepts i used to have a better handle on).
think of an example: when a large % (i have no idea of an exact #) - the majority of feedlots are out of supply or becoming razor thin at he same time-----10% has a very different significance than it does today.