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Palouser
Senior Advisor

PS

PS - Stocks to Use ratio antiquated? You have got to be kidding me.

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jrsiajdranch
Veteran Advisor

Re: PS

Here's the thing Pal,  If we have an ending number of 15billion or so the pipeline has expanded just by the increased capacity to grind.  So the stocks to use ratio isn't necassarily having to grow to keep percentages. Otherwise wouldn't we need to have about 2.5 billin in end reserves if we needed to keep the same ratio?  Where do we store that?  

 

Doesn't that mean that the ratio thing is just a number that is just a number with real no world significance?  What does it mean to have a 15% stocks to use ratio?  Why is that better than a 5% ratio?  

NOt kidding just saying it is 2011 not 1980 why do we use the same measures?

 

As to taking it to the forum well my opinio0n is that the dollar is very relevant to our over all long term market health and it is very important to the short term as well.

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semndairyguy
Veteran Contributor

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

I hope I'm not the person of ill repute you were referring too!!!

 

Good post JR. We basically have the same ending stocks then as they are projecting for this year. But why is the price higher? SPECULATORS, not ethanol as some would want you t obelieve. Production has increased to meet the demand increase. IMHO, ending stocks and stock to use ratio are just laughable numbers pulled out of USDA's collective ass. But that is what the trade uses for numbers. So that makes them important. But what does a stocks to use ratio of 5% mean....or 15%?? Or really what do ending stock numbers mean when USDA can manipulate the "feed useage" or yield to suit their needs. 

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Palouser
Senior Advisor

Re: PS

Your same argument regarding inventories. pipeline and price were made in 2007-8.  I said there were going to be big problems prior in wheat. It happened.

 

Math is math, but not understanding the logistical problems regarding pipeline supply and low inventories is to not understand market basics for grain. Grain positioning is everything. The production in the Delta is insignificant to the over all market in terms of any change in acreage. But if it's out of position it is iirelvant to some. If there is competition for that supply, then the dynamics can become severe. But if the crop conditions are severe, as they often are there, then it's a different ball game.

 

It's alright to theorize or look at pie in the sky math, but it's not a substitute for knowing real world market dynamics. Same with the $$$.

 

The chart I linked to addressed the value of the dollar. It seems clear to me that the current situation is a pattern that would repeat itself in any year. We are in dangerous territory this year with corn. We were in dangerous territory with wheat prior to 2007-8 and the market was to complascent to act until it was way too late. It might have made up for that by the strength ofd the reaction when it finally came. i don't think the market is that oblivious, though I will guarantee it is a lagging indicator.

 

The problem with sky math is that a person who is driven by ideology can take comfort in proving their case and be absolutely oblivious of the real world. The direction of the conversation in this thread indicates that danger..

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jrsiajdranch
Veteran Advisor

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

NO your the person who gives the people of ill repute a bad name! LOL. Last day of sitting around wife says I geo to get back at it tomorrow! ROFLMAO. ( to be honest I am sick of this sitting around)

 

I was referring to a guy called affectionately JC!

 

Good point about the USDA comic book!

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semndairyguy
Veteran Contributor

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

You better get back to work soon or you may just become a "real" dairy farmer!!! Oh and remember over analysis leads to paralysis.....

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jrsiajdranch
Veteran Advisor

Re: PS

IF the delta is insignificant then ND would also be. THe location is important but the delta market has largely been used for a feed crop for poultry and for hogs. The deep south corn is surely used for feed and the midwest stuff is corn and ethol. Kansas actually has a lot of corn however they are out of the traditional pipeline. but that corn will be sourced to the midwest ethol plants for sure.

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Palouser
Senior Advisor

Re: PS

You are getting quite a ways from my central point regarding your general view of the markets.

 

However, ND is insignificant regarding the main trends in corn supply. But, if there are going to be low inventories then the Delta and ND will become more important - and farmers there may get higher prices. I would guess a significant amount of ND corn is exported via the PNW  to Asia. IF there are percieved shortages - that is, the ending stocks go even lower than forecast - the Asian markets are lucrative if you're close enough to the PNW where the basis is always spectcularly positive compared to anywhere else.

 

The puzzle is worth putting together based on real knowledge of market behavior. Generalizations or poorly based theory will lead you astray.

 

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jrsiajdranch
Veteran Advisor

Re: PS

Well Pal the reason for the post was that in the corn demand II thread the discusion became the use of DDG's and where was that included. I added that in as USDA doesn't do to come up with a total stocks number. I haven't had anybody say my total stocks number is wrong. Is that what you are suggesting?

 

If that is the total stocks number and usage is say 13.5 than we have a very similar ending stocks to that 200/2001 number. The stocks to usage ratio is just merely a number that has trading significance but no real world significance. What it means is we will not run out of corn! 

 

Will there be areas of deficiet? YEs there always are. However does an ending number of 1.5 billion bu. justify the price of $8?  I would say no.

 

THerefore going forward to next year if we have a 13 billion bushel corn crop we again have a 14.8 billion bu. corn crop when you add back in the ddg's. with a billion in carryover or more than this year . we could actually build stocks!

 

So then the stocks to usage ratio may still be historically large with a stock pile that is historically the same and yet we some how justifyu over historic values?  I think this is the powder keg about to blow.  I still maintain it is all about the dollar!

 

Fire back good discusion.

 

BTW there are always corn deficiet areas.

 


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semndairyguy
Veteran Contributor

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

I would contend that BOTH ending stocks and stocks to use are insignificant in the real world. The ONLY time they are significant is if you bins are empty and you have livestock to feed. Otherwise they are just a number made up by one group of paper pushers=USDA for another group of paper pushers=traders, both hedge and spec. I'm not so sure the dollar has as much to do with it, as grains being a "safe" haven for Spec traders on a perceived notion that we are short grain. Yet many of the elevators and river terminals around me are already wondering what to do with 2011 corn.
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