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Palouser
Senior Advisor

Re: From the floor June 15

Please, show me when corn demand dropped by 50% in any large sector at any time. If in exports then show me the drop in global demand at that rate.

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OK_Grains
Contributor

Re: From the floor June 15

Ethanol usage last week was 880,000 bpd - which is a drop off of around 4% vs the week before. Not exactly 50% fall-off. With so many moving parts - crush economics / blending margins in ethanol, Livestock prices, competitive origins in export markets.....etc etc it is impossible for anybody to suddenly say "OH WAIT, $8 is too high and we will never use any corn at this level!!" Which is why we have the fluctuations and volatility that we have in both the physical and derivative markets. Sure there are a lot of other factors, including investor panic right now, but the point is that its a constantly changing picture.


Evidence is there that towards $8 spot prices we are starting to see rationing of demand which is exactly what we need considering the current old crop balance sheet which projects around 5% stocks to use or around 19 days of supplies at the end of the campaign. But does a 10% price break in Corn ( which has not been accompanied by a similar break in cattle, hogs, ethanol..) ration the required demand to get through to the new crop??? hardly. This is exactly the reason why the old crop has been so resilient on any extensive breaks.....they only serve to increase spot demand again.


Still seems to me that we are playing with fire to have these sort of magnitude sell offs in old crop corn on such a frequent occurence. Keep in mind also that if $8 is rationing in old crop, what risk premium could there be for Dec11 given its is trading $6.60

This market remains very dangerous.

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timetippingpt
Honored Advisor

Re: From the floor June 15

Every good hedging opportunity is always considered "dangerous". Nature of the world and humans.

 

If you think it is dangerous, what is your plan? There are tools out there that take away alot of the danger.

 

As I said 2 weeks ago, it was/is not the right "time" for producers to take price risk. The same thing was being said about wheat back in Feb. How is that working out for producers?

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NCcorntrader
Senior Contributor

Re: From the floor June 15

Pal-

 

guilty as charged. sorry for the embellishment.

 

total US demand dropped 5.3% from 07/08 to 08/09 according to USDA. avg prices over the years prior were $3.04 and $4.20 respectively. avg price last year was $3.55. spot price as I write this is $7.13.

 

IMO current demand is down 10% from statistical norms. 

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NCcorntrader
Senior Contributor

Re: From the floor June 15

OK-

 

i think this is the mistake in your logic:

 

"But does a 10% price break in Corn ( which has not been accompanied by a similar break in cattle, hogs, ethanol..) ration the required demand to get through to the new crop??? hardly. "

 

just because a price is 10% off its peak does not mean it is a price "break" i could just as easily say we are at a 10% premium from the 5/12 low.

 

however, given the history of the price of corn, i would say they latter statement has a greatly likelihood of being true.

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