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Veteran Advisor

A person of ill repute............

Told me to say something scandals.  So I figured I hadn't stirred the pot in a few weeks so here goes!


I can still find ways to make a case for that 5 dollar corn call I made a few weeks ago. Heres the link

I still see the many production problems that are ahead for this corn crop ( however not right in my garden spot) But the thing is that we keep talking about the supply demand thing.  Well the chart by NC trader got me to thinking and I thought I would just share my thiughts. 


It's a free country still ain't it?






If you look at the chart from 2000/2001 and you can see demand was about 9.5 billion,  Any body know what supply was?


CORN                        :
Area : Million acres
Planted : 79.6 75.8 78.9 * 78.9
Harvested : 72.4 68.8 72.1 * 71.0
Yield per harvested : Bushels
acre : 136.9 138.2 135.8 * 125.2
: Million bushels
Beginning stocks : 1,718 1,899 1,621 1,636
Production : 9,915 9,507 9,790 8,886
Imports : 7 10 15 15
Supply, total : 11,639 11,416 11,426 10,537
Feed and residual : 5,842 5,825 5,750 5,600
Food, seed & industrial : 1,957 2,055 2,160 2,170
Domestic, total : 7,799 7,880 7,910 7,770
Exports : 1,941 1,900 2,050 2,000
Use, total : 9,740 9,780 9,960 9,770
Ending stocks, total : 1,899 1,636 1,466 767
CCC inventory : 8 5
Free stocks : 1,891 1,631
Outstanding loans : 253 200
Avg. farm price ($/bu) 2/ : 1.85 1.93 1.80- 2.20 2.30- 2.70

Wow those are some interesting numbers.  Here is the commentary from this August report.


COARSE GRAINS:  This month's outlook for U.S. and
global feed grain supply and use projections is
dominated by a huge month-to-month reduction in the
U.S. corn crop. U.S. corn production is forecast at
8.886 billion bushels, down 904 million bushels from
last months' projection and the smallest crop since
1995/96. The first survey-based yield forecast, at
125.2 bushels per acre, is down sharply from the
adjusted trend yield of 135.8 bushels used last month
and the smallest since the yield of 113.5 bushels per
acre in 1995/96. Sorghum production also is reduced
sharply from last's month's projected output, which
was based on trend yields. The smaller corn crop is
expected to lead to reductions in domestic use and
exports of a combined 190 million bushels, leaving
projected 2002/03 ending stocks of corn down 699
million bushels from last month. The projected price
range for corn is up 50 cents per bushel on each end
of the range to $2.30 to $2.70.

Forecast U.S. 2001/02 ending stocks of corn are up 15
million bushels from last month as a
25-million-bushel reduction in exports more than
offsets an increase of 10 million bushels for
industrial use.

Projected global 2002/03 supply, use, and stocks of
coarse grains are down sharply from last month.
While much of the drop is due to the huge reduction
in the U.S. corn crop, foreign coarse grain
production is down almost 11 million tons from last
month. Projected corn production in Brazil is
reduced 1.5 million tons due to reduced area because
farmers are expected to plant more soybeans.
Projected Canadian barley production is down 4
million tons from last month as hot, dry weather
conditions are expected to result in the smallest
crop since 1979/80. Expected coarse grain production
is down more than 3 million tons for Eastern Europe,
including 2.3 million tons less corn, and down 2
million tons for India, including 1 million tons of
corn. Global coarse grain imports are little changed
from last month. The smaller crops of Canadian
barley and corn in India are expected to result in
larger corn imports by each country, but this will be
offset by reductions in projected corn imports by
China and several other countries. Projected corn
exports are down 500,000 tons for Brazil due to the
lower crop, but higher prices are expected to result
in larger Chinese exports--up 2 million tons from
last month to 8 million tons. Smaller U.S. and China
corn stocks account for most of the drop in projected
global ending stocks of coarse grains from last

So here's my point we go from a total planted acres of 79.6 with harvested at 72.4. with an estimated yield of about 125!  (this is the august report I am looking at.) 

To the expected chart that has us at 90 million planted with 165 for yield!  I think for a ten year period that is amazing.


But going forward here is the thought up till this production year we have for the last 2 years run below a billion carry out. so here is my question cause I believe that the price of the whole crop is really just based on the very few supplies at the end. 

Did that billion bushel surplus of just ten years ago really keep us at a price of 1.80 to 2.20?  OR did the strong dollar do it?


IF it is the fringe bushels that keep up the price than I would submit that ethol has had very little to do with the price of corn as supply has really kept up with demand. we went from growing a 9.9 billion bu. crop  with a total available supply of corn of 11.639 to having available a 15 billion bushels of corn and corn equivalent ( looks to be about 1.8 billion bu. of ddg's as replacement feed for corn available plus a 13.2 billion bu. crop.From one years production!  So tell me again has demand wained?  Prolly not. But supply hasn't dwindled either!  SO now we are trading based off of old historical equivalents that make the price outcomes obsolete. 

FOlks corn is to high priced given historical trends.


I would think you would want to be covering your needs at these high prices!


All I have concluded is that the weak dollar has pushed an in balance situation towards one of unbalance.


You can say all you want about the cost of corn in the retail price of so many products however the price of corn for the livestock farmer is just plain outa hand. If you are feeding dairy cows right now feed is half of your total cost of production. IF you are buying all your corn needs at today's prices guess what?  Your corn cost is one third of your total milk check! ONE THIRD. There isn't that much play in the milk check at these prices.


So the key thoughts are outa this little rant. Not to long ago corn started with a $1.  in historical terms we do not have a shortage and guess what we have had weather problems before and we have survived we will this time.  Fire away.







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38 Replies
BA Deere
Honored Advisor

Re: A person of ill repute............

Hey Jr, something that bares watching is Bernanke defending the dollar or rather  "testing" commodities.  David Morgan explains his take pretty well.  Speaking of baring watching...this Alix Steele is something   Smiley Tongue

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Re: A person of ill repute............

   JR back then the stock market and real estate were in much better shape.   As I have stated before, Wall Street doesn't care if they trade phone booths or Palimino ponies, as long as they make money doing it.   Right now corn is king.  It's even in the local big city newspaper every week.

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Veteran Advisor

Re: A person of ill repute............

BA good clip. Thing that stuck out to me was how many times they said "control".  I think these pupet masters get their collective hands bit real hard!

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Veteran Advisor

Re: A person of ill repute............

NW this is the time to harvest your second crop.  THe speculators crop.

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Re: A person of ill repute............

Hi JR,


I'm too lazy to do the work and find all the numbers but I think that an even more compelling case can be made about soybeans. Globally oilseeds are not that tight.


Part of the pricing is the push me/pull you thing with corn and acres. But the greater part seems to be the value of oil in the crush which even more than corn/ethanol is perfectly joined at the hip with oil prices. With biodiesel capacity use very low,heating oil puts a perfect default bid under the veg oil price at all times.


So I think it mostly continues to come down to oil prices and the overall level of risk aversion in financial markets as a whole. And the trend there doesn't look good to me- things are feeling very "risk off" as the market looks to the closing of the meth lab at the end of the month (and the realization sinks in that Mom was right, meth doesn't really solve your problems.)


As to how you market in this environment- when an announcement by the Fed Chairman can change the price of corn by $2 in short order, I don't have a clue. But the current poliitcal winds seem to indicate definitely no more fiscal stimulus and probably no QE3 at least until the markets go into serious withdrawal and scare everybody into begging for it.


So I'm saying $60 crude by fall (geopolitics can change that in a heartbeat) and the corn crop probably gets somewhat rationed via very poor ethanol margins.


Or, weather could come out of the 4th of July weekend like a blowtorch and we could have a test of the resilience of the US ag sector that would make 2008 look mild.


I'm proceeding from the point of view of wise old Richard Russell who says that in a true financial bear market, everything goes wrong.


fwiw, h

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Veteran Advisor

Re: A person of ill repute............

NOXIE I am thru calling this a bear or a bull market this is a Jackass market. to stubborn to do what it should for it's own good but muely enough to kick the stuffing out of us all. We are in for a hard ride no  matter which way this goes.

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BA Deere
Honored Advisor

Re: A person of ill repute............

Let me just throw this out here.  Let`s say there`s no QE3 and we get to October, houses aren`t moving, unemployment inching towards 10%.  This economy the last 2 yrs has been an engine that only runs with ether squirt into the intake, it kills the second you quit squirting.  Now, in October Obama will be thinking election is 1 yr away, no one gets relected with 10% unemployment, I could see him on tv saying he inherited a far bigger mess than he thought and his advisor Paul Krugman is calling for "More Ether!!".  Short term, who knows, they`re testing things, if QE2 runs it`s course and commods are still a bull, they`ve definately lost both the steering and the brakes.  Long term ..inflation is the shortest line between two points. JMHO 

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Veteran Advisor

Re: A person of ill repute............

BA I bet he does get reelected with 10% unemployment!

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BA Deere
Honored Advisor

Re: A person of ill repute............

shoot me now, Jr!   Smiley Happy  The real unemployment rate is over 18%, if he pulls it off he`s magician.

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