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Mizzou_Tiger
Senior Advisor

Help me understand.......

something......maybe I am extra dense today.......but read thru the global grain reserve thread and I just don't get it......

 

first off why do we need a new one...........we already have one............its called ethanol...........if things get bad enough all you gotta do is start shutting things down...........a total shut down in the US would equal 35M acres in gallons terms and probably 25M acres in net gain after feed............thats a lot of acres that could go to production of core food production............and better yet, it located in once country.........and even better yet the industry "turns" the inventory by default when its not needed for food, by using it for fuel........and even better than that, its not actually called a grain reserve, so until they mess with the "tap" it doesn't envoke negative price action.............and even better than the better than that statement, it has pushed us to overproduce while still maintaining markets and some profit...............

 

second, a grain reserve envokes negative and false security because it becomes a part of the "system"...........therefore "capacity is increased enough to handle a few B bushel or whatever and then stops............while envoking negative price pressure because of this idea we will always have enough...........but in reality it only stabilizes prices............

 

third, and this is bias from my view point, but what does a grain reserve do for us today............right now what does it do..........IMO we are already running flat out in the world............so even if we had one, do you magically think the grain reserve ferry will come down and fill the bunkers............its not like whats produced is wasted...........grains are not like oil..........you cant just open or close the spicket............the only way to bring more supply into the system is to add capacity, IE more land..........thats a tough one..........see ultimately what you are saying is we need a LAND RESERVE instead of a GRAIN RESERVE............I think we have some of those too.........

 

so in short, WHY and what does it really "BUY" us.............you wanna grain reserve just increase the ethanol blend rate to 15% and then let it float between 10-15% based on world demands...........and for those that think this talk of ethanol has nothing to do with wheat...........well if corn goes to $3 because ethanol is throttled (and for the record I have issues with messing with ethanol until a last resort, but thats another thread, even though I favor ethanol as a reserve versus a pile of rotten grain) and wheat goes to $9, what do you think will happen, I bet a lot more wheat acres and thus more supply..............

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15 Replies
tree fmr
Advisor

Re: Help me understand.......

MT,

I agree, a grain reserve is like buying a Christmas tree on Dec 26, its a great deal until you pull it out of the garage in 11 months!  CRP is a commodity reserve, covers all the crops that can be grown in that area.  The last time I checked, dirt won't spoil when stored!

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patriot3031376
Veteran Contributor

Re: Help me understand.......

I don't have the time to pull up my past links but I have said the same many times. The RFS gives EPA the right to suspend mandates at any point in time. Agreed that E15 would give us maximum flexibility,ie,7.5 billon bushels for e corn grind max and zero if it ever does become "food vs. fuel". How much more of a reserve do we need? The only downside would be the mothballing of a complete industry for a period. The huge upside would be when Americans wake up one morning and realize that gas is $5 a gallon because that evil ethanol is gone. They would be begging for ethanol after that. Maybe celloustic would even become viable then.......ya right.

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farmer46
Senior Contributor

Re: Help me understand.......

I one thing I remember about the grain in storage in the 70's and 80's is, I was paid to store it by the government.  I do not think finding money in the Government to paid farmers to store corn would fly in Congress.  Without government payment, each time the price would rise, grains would be sold.

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4wd
Senior Contributor

Re: Help me understand.......

Bad Idea. Trying to recycle a failed program.

I remember the CCC grain reserve program 40 years ago. Govt owned bins, no fans, a lot of spoliage. Kept corn prices depressed for years. Good for cattle feeders, though.

 

I also think using ethanol as a reserve program is short sighted. Don't forget all the DDG sales happening daily. If you cut off the grind to free up corn for livestock feed, then will the feeders pick up the bill for the extra costs in corn and ethol plant stoppages?

Will the consumer see cheaper gas?

 

I think the geenie is out of the box, and the best thing is lift the blend wall and let this whole food fuel thing reach it's own equillebrium. We may have $10 corn, and $2,000/hd feeder steers with Americans spending  instead of 18% of their disposable income on food to 35%. Keep any gov interferrence, other than a free cheeze give away, out of it.

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Nebrfarmr
Veteran Advisor

Re: Help me understand.......

If they want a 'reserve', all that has to happen is for the market to provide an incentive for it. 
Let's say corn is $6.40 right now.  Give me a chance to sell it at $6.80+ in September, and I'll reserve some for you.

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4wd
Senior Contributor

Re: Help me understand.......

How simple, and effective! Let the free market decide the reserves.

I'd reserve some Oce/Nov delivery at $6.80 too. But reserve at my cost even more at $7.50

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rawhide
Advisor

Re: Help me understand.......

there you go thinking again nebrfarmr that makes too much sense

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gregs3821958
Veteran Contributor

Re: Help me understand.......

We are in the drivers seat now in some ways. If do not watch where we are going we could end up in the ditch. To me it is like a preventive maintenance program. I suspect the consumer will not be in a mood to listen to our excuses if there is ever a time when we have to learn the consequences of not having a grain reserve. 

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Nebrfarmr
Veteran Advisor

Re: Help me understand.......

I'm not going to weigh in, whether or not, I think the reserve itself is a good or bad idea, I haven't thought about it hard enough to say.


However, I will say, I don't think right now, is the time to start a reserve.  We need all the grain to go to consumers as we can.

Now, say we have record production in 2012, and carryout is 2B, we can discuss the pros and cons.  However, with carryouts under 1B, (I'm speaking corn, here) we really don't have enough extra, to be putting it away anywhere.