Corn still potentially explosive

[Palouser]

The abilityy of American farmers to get corn in the ground quickly is hard to over estimate.  However, I think there is a huge risk in the market for corn users.

Marketeye's mention that China has bought more than 4 MMT of corn caught my eye for sure. There is almost universal acknowledgement that China's reserves of corn have been pulled down - and they WILL replace that reserve.So the other risk is that China doesn't get as good of crop as hoped, though it is certainly too early to speculate, though one can assume increasing demand there. They have also been buying feed wheat. Along with their gargantuan need for soy it all indicates a unabated need for feed and a need that can't be mediated except gradually more volume ahead.

Some area's inability to plant is just another small factor. We need very good weather this year though, and already we are seeing the possibility of  moderate EU drought.

End result. Everything has to go right with nothing big going really wrong production wise. The market will have a tough time with this, as they always do.

[Palouser]

Add to that, China's drought in the center of the country is reportedly intensifying.

[Mizzou_Tiger]

link to another story, front page cnbc..............http://www.cnbc.com/id/43188915

for those that have read my post before, you know were I stand..............this is not 2008, I have been saying that since late fall........reference my acreage table...........

everything else that is going on with world production is just fuel to the fire.........

IMO the trade has no clue was about to hit the fan.............

its no longer about supply, thats done shot to heck, and that shipped sailed...........

its a demand ballgame, and specifically for the US farmer, exports............domestically we will still chew threw the bushels and IMO ethanol still has some firm footing.............we are about to find out just how elastic or inelastic demand really is, IMO we may find out that demand is much more inelastic than first thought...........we shall see..........we saw what appeared to be demand throttling a few months back, but IMO that was a bluff...............NO ONE WANTS TO BELIEVE THIS IS A RUN AWAY FREIGHT TRAIN AND THE LONGER DEMAND CAN BUY THE DIPS THE SMALLER THE PILES GET OUT THE BACK DOOR...........

[Artifice]

A very different View - FWIW Grain Reserves are very expensive to own, storage costs + gradual deterioration. CBT Wheat, cost of carry over 20 years, I think is ~$8.00. Wal-Mart killed Kart, 200 billion vs 0, but using just in time inventory. TheUSis a major grain exporter, ig there wee not regular sales, we would drown in excess grain. USE coarse grain annual use is ~ 360 mmt, 4 is 1% of that.

My guess,Chinabought some for insurance. One marketing strategy is to sell into demand, be a producer,  not a perma bull speculator. Corn has been strong for 2 wks even with the crop getting planted, though slow in the ECB, probably that says the market anticipated this export deal- so sell them 25% of your remaining grain, give them what they want.

Overall corn S&D is snug, market cannot afford a deep drop in prod for 2011.

Mr. Palouser, most of the crop is in, the ECB is still behind. If you are a long, long shot gambler, maybe you play for an explosion, others would sell you that risk.

Month of June, has a lot of risk for corn longs and pollination period in July, more so.

Others may be different, I want to collect storage, premium, not buy it.

Post memorial d wkend? Could be  trap door opens in SWR as harvest gets underway, for a VGood crop, IL looks especially good.

Big crops needs to find a home. A corn bull too chicken to be long corn, so is long Wheat, IMO has a stretcher waiting from him.

[Artifice]

mizzoi- I think demand is losing elasciity.

Base commkiodities , food become less and less of our incomes/consumption.

Am I right this should result in HIGHer option premiums?

When we hve w bull mkt, it will extend vs 20 yrs ago.

??

[justinbarnes710]

Yesterday Cargill hosted a meeting for farmers in my area (Central OH) with over 200 attendees.  The purpose of the meeting was to address crop insurance concerns and answer questions about prevented planting.  There was also a discussion about canceling contracts on 2011 sales for those who are having difficulty planting.

We were encouraged to get corn planted because we will be "rewarded".  The potential shortage of grain is already reflected by our harvest basis of just -.15 Dec.  However,  the Cargill reps all have a bearish bias and believe we are at or near the top.  Now I am not bashing Cargill, just enjoying the irony.  For what it's worth I can't remember any grain merchandiser ever having a bullish bias.

My question (for both bulls and bears) is this...  what is the floor for Dec corn this year?  I'm having a hard time even buying puts because I just can't see a collapse like 2008.  If you feel we are near the top, how low would you project it might fall?  If you feel corn is still explosive, do you think we will stay above $6?

[Silverwheaton]

I see a posted basis of just -.05 in west central ohio at a feed mill.  That is for harvest delivery.

[infire]

I have trouble seeing corn dropping below $6, atleast east of Chicago because here in the east corn will be hard to come by so even if corn dropps to 5.50 what will it cost to truck it to your area 50 - 75 cents from IL. so your local market will have enough basis to stay well above $6 - IMO.

[Mizzou_Tiger]

So they set there and tell you to your face you will be rewarded if you can get the lake infested corn fields planted, and in the same breath say the top is near...................again, PP is a no risk, and for some a low or no input game.............no one likes to use it, but when it just won't quit its not worth it..............June corn is risky at best, sometimes it pan, sometimes it doesn't and at the end of the day you usually end up worrying about it all year...............when PP is no risk and could be nearly the same NET..........well its a decision thats for sure..........

Cargill wants you to plant corn, because they are in the business of needing a fair bit of corn for end consumption to produce some of their end products.............they can make money when corn is high and they can make even more money when its a little lower..................

[Silverwheaton]

I guess I am just thinking out loud here.  If  most take pp, then I think a person needs to sell a good portion of 2012 and maybe 2013  when the market explodes because we will have bigger demand destruction going forward when perhaps, corn goes to 8,9,10 dollars.  Maybe we all should think about the longterm also.