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glenlivet18
Veteran Contributor

Re: Floor Talk June 1

Wow, corn has now erased all of its morning gains.  Wonder if it will continue to go lower with equities and oil or if there is indeed a weather rally coming.

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GoredHusker
Senior Contributor

Re: Floor Talk June 1

Considering feed demand is no longer the biggest user of corn, it would probably be prudent to watch what energies do in here.  If they continue to fall, I just don't see corn having much upside.  I read on a blog yesterday about a professor from Illinois I believe claiming ethanol plants will pay up to $8.66 a bushel to stay operating.  He based his entire thesis on covering variable costs.  I say this is hogwash as I've seen what our local plants did back in 2008.  If there's an opportunity for ethanol plants to make more money selling previously contracted corn to them for more than they can make grinding it, they will.  When they did this in 2008, it turned our basis upside down literally overnight. 

 

In order to get things turned around, Helicopter Ben needs to get the chopper warmed up rather soon or Europe better get it's fire put out soon.  60 over sounds like a good basis until one looks up and sees where the July contract is trading.  The great basis really only helps those who were hedged on the board.  Roughly ten days ago cash corn was five percent higher than today even with the better basis.  The hedge funds giveth, and the hedge funds taketh away. 

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NDf
Senior Contributor

Re: Floor Talk June 1

Gored isn't somewhat cheaper energy prices  friendly ethanol demand? With cheaper gas more people might be out traveling this summer more than most people were thinking just a cuuple weeks ago. I guess I would like to know   what the sweet spot is  for ethanol demand crude above 100/barrel seems to lower demand so what price for crude could actually increase demand.

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too close for comfort
Senior Contributor

Re: Floor Talk June 1

If you buy the old buy the rumor sell the fact saying, does that mean that the traders still think the tightness in supply and the dry weather is just a rumor? 

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crophugger
Senior Contributor

Re: Floor Talk June 1

Hello Mike. Wish I knew how to post some pictures of corn that was damaged by the frost. It will probably grow out of it but I'm afraid it turned our 90 day corn in this area into 105 day corn which isn't good. Looks good from the road but walk in and it's a different story. The soya seem to be okay some damage in the no till fields. If a lot of trash the worse it is. Also if the tag said 90% germ I think it was closer to 75% germ. Thin stands some raplanting going on.

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GoredHusker
Senior Contributor

Re: Floor Talk June 1

Somewhat cheaper energy prices will do nothing more than slow the bleeding.  What one has to remember is the fact that the unemployment numbers are much higher than 8.2 percent.  I read somewhere a month or so ago that we have the smallest workforce since I believe 82'.  Our population has grown quite a bit since 82'.  No jobs means no work and no reason to travel to and from work.  This is why gasoline demand is somewhere around a 12 year low.  It will take something more than somewhat cheaper energy prices.  It will take full meltdown much like the end of 2008 to get things rolling again. 

 

The other thing to consider is how much poorer even the rich feel when the stock market makes a 10-15 percent drop.  In 2008, roughly half of Buffett's net worth was erased.  It doesn't take a rocket scientist to figure out why Buffett wants investment income taxed like ordinary income.  He wouldn't have paid any taxes the last three years because he could have deducted what he lost.  When people get scared of future events, purchases fall. 

 

Nobody really knows at what price crude will increase demand, but I'd hazard to guess somewhere around 60-65 bucks a barrel.  From July to October in 2009, crude traded in this area and the national average for gas price was between 2.45-2.60 a gallon.  The other thing that really needs to happen is for diesel to get cheaper.  Diesel prices probably have more impact on prices of consumer goods as anything else because everything has to be transported one way or another by truck.  Diesel in the mid to upper 3's will continue to stall any recovery effort.  At the end of the day, the best thing that could happen for our economy is for Helicopter Ben to resist the temptation to print more money. 

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