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elcheapo
Veteran Advisor

Corn.....some prespectives

It's almost new years.......the people in NYC are freezing wanting to watch a lighted ball to come down....I think this is the 2 or 3 ed

coldest news years eve in history back there...........and yes.......this is the home of the NYSE............i'll just leave it at that !!!

 

Corn......many uses, corn meal, corn flakes, feed, and the fixings for moonshine (either the auto consumed or human consumed)

I know more about wheat, but the sad problem is, the number of uses for wheat is limited compaired to corn.

 

looking at the data, corn and beans have a brighter future than wheat currently........but the ongoing cold and dryness, might change

the wheat market after bit.

 

but lets get back to the subject, corn.

 

let's do some reviewing.

 

in 2016 we produced 15,148,038,000 bu of corn

Here is how it looks

Iowa               2,740,500,000  18.09%

Illinois             2.255,650,000   14.89%

Nebraska        1,699,900,000   11.2%

Minnesota        1,544,000,000   10.19%

Indiana                946,310,000  6.25%

South Dakota       825,930,000  5.45%

Kansas                 698,640,000  4.61%

Wisconsin             573,160,000   3.78%

Missouri                570,500,000   3.77%

Ohio                      524,700,000   3.46%

North Dakota         516,666,000   3.41%

Texas                     323,850,000   2.14%

Michigan                320,280,000   2.11%

 

www.beef2live.com/story-states-produce-corn-0-107129

 

If we look at acres, in order of total production oer state  2017

 

Iowa         13,500     (1,000 Ac)

Illinois       11,100

Nebraska    9,800

Minnesota    8,000

Indiana         5,500

South Dakota  5,200

Kansas  5,300

Wisconsin  4,050

Missouri      3,250

Ohio            3500

North Dakota  3,700

Texas               2,400

Michigan           2,500

 

www.usda.mannlib.cornell.edu/usda/current/Acre/Acre-06-30-2017.pdf

 

What USDA thinks we will produce, and how we will get rid of it this coming year  2017/2018

 

Area planted  90.4 ma

Area harvested  83.1  ma

 

ypa  175.4  (last year 174.6)

 

beginning stock  2295

production  14578

imports  50

SUPPLY TOTAL  16922

 

uses

Fed and residual  5575

food, seed, industrial  6985

moonshine  5525

DOMESTIC TOTAL  12560

 

Exports  1925

Use, Total  14485

Ending Stocks  2437

 

https://www.usda.gov/oce/commodity/wasde/latest.pdf

 

Eyes glazed over yet ?

 

well let's wake them up a little.......

first lets look at the current drought map

www.droughtmonitor.unl.edu

 

hmmmmmmm a lot of places need water don't they.........

 

well look at these two.......see if you think that needed moisture is comming

 

www.cpc.ncep.noaa.gov/products/predictions/multi_season/13_seasonal_outlooks/color/p.gif

www.cpc.ncep.noaa.gov/products/predictions/multi_season/13_seasonal_outlooks/color/t.gif

 

lastly lets look at what the bankers are saying about the working capital and the like

 

https://www.kansascityfed.org/research/indicatorsdata/agcreditsurvey/articles/2017/11-9-2017/farm-ec...

 

ok........what am I getting......

 

I think we will see lower production.....look at the production areas, then look at the wx data.....I would say in Tx, Ks, Neb, SD and

possibly IOWA will see lower production.....I would say a starting point of 5%.  In many areas, there is short to very short sub

soil moisture, that is your "bank account".....the balances have been small, at least in the Midwest.

look at the numbers, and if you knock off 5% from the above state production, we are look at a different balance sheet.

We see on ongoing drought/dryness......then look at the projections going forward, not much hope......one thing, ususally

when you have hotter weather, you typically have dry weather.....look at the precp, then look at the temp.....

you can see why i'm saying the above states could have problems.

 

yes, no till has help, some of the new corns out, might do better under stress.....but none have been developed yet, to my knowage

of growing in little I any rain !!

 

oh, I also look for a "cheaper" crop put in.   As the bankers said, working capital might be tight

 

we are now seeing fertilizer going up.......seed prices DID NOT go down......Chemical.......generics are becoming more and more

popular.  Many producers are frankly miffed over the big seed companys holding the high prices....a sign of disconnect from the

people they sell to.

 

Due to that, I think we could see cheaper seed used, a lower amount of fertilizer and maybe not the newest and best herbicides.

 

all of that adds up to lower production.

 

so, I think this coming year we will be looking at lower production......................

 

but what about price ???

 

WE SHOULD SEE HIGHER PRICES.........

 

but, we all know the cme crowd just does not understand that it can't be unless USDA says so

 

understand, only 1/2 of the upper level positions at USDA have been filled.....they are not working on all 8 cylinders

 

here boys and girls is where I need some help......I think we can see there is evidence beyond "reasonable doubt" that we could see

a smaller crop, an with the use we have been seeing on the WASDE report, our stocks could be drawn down.......but.......we also

know that CME and the like, keep telling us, adequate supplies, usda is projecting bigger yields, there is no reason to go up......

 

how do we get beyond that thought ????  when we see a change........and most importantly.......how can we take advantage of

that, once a few people see the true handwriting on the walls ?

 

does one use options.......does one go directly to the board.........when and at what level ?????????????

 

I hope I've "primed the pump"........and maybe some better at the aspect, will enlighten us ??

 

Hey BA........what's your Christmas present say about such a situation setting up ???

 

 

HAPPY, SAFE AND PROFITABLE NEW YEAR !!! Smiley Happy

 

 

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5 Replies
BA Deere
Honored Advisor

Re: Corn.....some prespectives

I`ve been waiting 3 years now for farmers to cut inputs and have a poorer yield, but it never happens.  Tilers lay pipe, pattern tile on land I`ve thought was already pattern tiled twice, strip tillage, fertilizer spread, smoke applied...it looks like business as usual this fall, if you didn`t know better, you`d swear corn was still $7.   I`ve given up after 20 years of predicting the last 2 droughts, weather matters less and less, we`re collectively going to produce the biggest crop humanly possible and the prices are going to suck, unless something way out of left field does something that isn`t even on our radar that helps prices.

 

My Art of Grain Merchandizing book is well worth the money, haven`t had time to read it, only skimmed it.  I don`t expect miracles out of it, because it talks about basis and around here (which must be different than many other areas) our corn basis for years is negative 40 cents to negative 50 cents, so here we`re only playing with a dime.  They say lock in basis or Tom Ptzenmier says "lock in basis...buy a put" when the buyers want to buy, sell it to them.  That`s all good, but selling when the buyers want to buy in this environment gets you just below break even, if you want to make money, you`ll have to hold until the "buyers HAVE to buy" like in the 1995 hedge-to-arrive squeeze.  

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roarintiger1
Honored Advisor

Re: Corn.....some prespectives

"USDA not working on all 8 cylinders"    Are you sure you want them working on all 8 cylinders?

 

 

 

I think it's more like "their elevator doesn't go to the top floor."  Smiley Wink

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JimMeade
Veteran Advisor

Re: Corn.....some prespectives

elcheapo, you leave us with the perennial question:  how do we market it?

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clayton58
Veteran Advisor

Re: Corn.....some prespectives

Well, Jim, my plan is to be patient, and keep the powder dry.  IF... Cheapo is right with his weather forecast, we on the fringe will bear the brunt of the dryness.  So at this point, it looks like as much upside potential as downside, and we've got to grow it before we can sell it  Maybe look at some option plays come March, and again in mid to late June.  And , yes, we'll look at ways to optimize insurance 

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elcheapo
Veteran Advisor

Re: Corn.....some prespectives

jim, clayton, how to do it is what has me puzzled.  I've often thought of a "roll up" program. As the price goes up, we lock

something in, I liken it to the safety system on an elevator....they have hooks or fingers that come out on the car, when the

car goes up, it pops out and if something happens, it locks in...same coming down...........

now how you do that, I don't know....I guess you could use options, but the problem with options are, they usually are kind of high.

you have "time value" to deal with, while with a contract you just have "market movement.

I would like to see someone do a study on a "roll up system".  I've read several thesis on using "dates" to enter the market.....

I could possibly see some use in that, but then again, each year is different......but then again, the old idea that by july

4 you'll know what the market is going to do........but if it looks down, you may have waited too long.

I guess I could put my money where my mouth is, and it things pan out as I have painted "one picture", then I should sleep

easy at night going long several contract............

 

but.......

 

something I do think perhaps wise, if a feeder in the panhandles or in the sw corner......maybe be somehow taking advantages of the

lower priced corn, and somehow perhaps also be locking in the basis.  If this comes out, might not be a lot of corn down in that

neck of the woods......i'm not much of an expert on irrigation, but what I understand, when it gets hot, and dry, you can't pump

fast enough, so you just have to do half of a circle.

 

irrigation would be handy, if dry, pre-water to build up some moisture in soil, and also get things to come up, then nurse it along,

but when it gets so big, you might not be able to pump fast enough, and as SW brought up, pumping water aint cheap.

 

 

but then what do we do if something comes from left field..........such as someone changes the RFS and lowers the demand for

moonshine.....if that hits the wires the computers read that as the end of the world, and down it goes, but the forgot to read the

article that says it is so dry that the corn will not come up ??

 

I have a feeling that there will be a change in the rfs.......too much big money pushing aginst it.  what I think will happen is that

it will be pushed down to the retailer, where you will need to add another tank, another pump, and a blender valve......that will

cost a significant amount of money........and locals will not do it, and will stay with what they have, and thusly oil wins......and

they will have no blood on their hands, and will point and put the blame on someone else...........

 

just wait, they poured a lot of money into someone, and they are going to get their investment back........they he didn't do

it in the first place.......he had to save face.....now that he is covered head to toe in mud, the doesn't care, and will do

"as he is told".

 

maybe i'm wrong, I've been wrong in the past, and most likely make a few more bo-bo's

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