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05-08-2012 10:21 AM
If there really is a lot of corn ready the end of August in the midwest, that is not a good thing. It means we had a hot, dry summer. Might get corn in the channels early, but the back end is going to run dry. Though with the price of NG, it might pay well to dry 30+% corn with an outside temp of 80 degrees. Do traders ever check the subsoil moisture profile? Stays dry a month, good for the crop. Beyond that, not good news.
I have to laugh. I remember the year Cargill imported beans in to NC and turned the market down hard. Here we have the exact opposite, we are exporting to Brazil, and the market didn't move up hard. Good news, that card of importing beans can't be played this summer. Call me an old fool, but I am starting to enjoy the show on the spin put out these days to make farmers believe they have the supply problem covered. Remember how we were told that pictures of poor beans from SA were 'isolated' problems. Even an old grain hoarder like myself: I am holding a much smaller percent of 2011 crop than normal. These prices are good enough for me to take some money off the table.
Mike, appreciate your comments. Corn that was planted April 24-27 around here would give a 10 rating. But that was less than 50% of the corn acres. Under the surface though, there are a lot of compaction problems left from little freezing action this past winter.
05-08-2012 10:37 AM
With the very real potential of a Euro-zone melt down in the works is this going to turn into a world wide depresion?
With the elections over there of the liberal "don't touch my entitlements" crowd, will it be theft by ballot? Does anybody have enough paper for the presses to cover all the credit default swaps?
05-08-2012 11:52 AM - edited 05-08-2012 12:10 PM
Your comments about corn shrugging off the bad news reminded me of what Kevin Hughes, a currency trader, wrote in a story he contributed a few years ago for our Mid-November Marketing Issue. He wrote:
"If I were in the ag business looking for clues to the potential price of my crop, I would start by looking at the political stability of a government. If there is uncertainty amongst Main St. and there is ‘talk’ about a shaky equity market, you can probably make an educated guess that the U.S. dollar is going to rally (Wheat will drop in price). If the confidence in the country is good, you should expect the stock market (Dow) to go up, the U.S. dollar to decline, and wheat/grains to increase in price."
Today's stock market is plunging, the U.S. Dollar is rising, but corn and wheat keep fighting off the pressure. But, to Kevin's point, crude oil is taking it on the chin.
05-08-2012 12:54 PM
It's interesting that you bring up the dollar. Most economists regardless of whether they see good times in our future or recession all concede that the value of the U.S. dollar increases this year. Wheat gets hit the hardest because we by percentage export the most of it. By keeping more wheat here in the U.S., it changes the ball game in terms of what gets fed. Right now here locally for wheat harvest, wheat is at an 80+ cent deficit to corn. There will be some substitution.
Today's price action with wheat and corn being higher while soybeans are lower really has little to do with corn and wheat shrugging off the news. Rather, it's because the funds are in risk off mode meaning they're liquidating their corn/soybean and wheat/soybean spreads they've been holding. Once the spreads are liquidated, we'll have a lot better idea just exactly how much of the news got shrugged off. With crude falling and some analysts calling for three buck national average gas price this summer, I doubt many ethanol plants are overly aggressive in here.
Any blowoff top that occurs in the corn market has to do it in the cash market because the futures market is technically very weak. Traders seem to have a lot of reservations about being overly exposed in the commodity markets. We keep talking about the possibility of exporting soybeans to Brazil, but what happens if we import corn from Brazil? The entire European situation wreaks right now. I continue to hear QE3 in the third or fourth quarter, and I bet we see it if Europe implodes.