I'm confused again/still

[Canuck_2]

Grains are up because of the dry weather in South America.

OK I am good with that. 

Dry weather less yield = higher prices.

Now I am reading predictions of yields from Brazil and Argentina and compared to last year and have to wonder just why prices are up.

Brazil corn 2011    57.5 million tonnes    2012 prediction reduced to 60 million tonnes

Argentina 2011      23 million tonnes      2012 prediction reduced to 24.5 million tonnes

Total 2011            80.5 m tonne         2012  84.5 m tonne

Brazil Soys  2011  75.5 million tonnes   2012 prediction reduced to 74 million tonnes

Argentina Soys 2011 49 million tonnes   2012 prediction reduced to 53 million tonnes

Total 2011     124.5 m tonnes              2012 127 m tonnes

Now unless 'new math' is employed here we will have more of both corn and soys coming from South America than last year even after the reduction from the earlier predictions of 2012 production.

So I am left wondering just how high prices can go for how long with more available in 2012 than 2011.

[BA Deere]

Talk about new math canuck, usda lowered us corn yield from 146 to 143, while some were predicting 150 and what did corn do? Well it dropped a buck of course :). Corn shouldn't have dropped, but funds were out and endusers still had a supply of $5 corn to use and were hoping for more.

[Mizzou_Tiger]

U.S. ENDING STOCKS (million bushels) 2011-2012
	Dec	Avg	High	Low	Nov	2010-11
Corn	848	838	899	712	843	1,128
Soybeans	230	213	247	195	195	215
Grain Sorghum	28	27	24	29	28	27
Wheat	878	830	867	731	828	862
WORLD ENDING STOCKS (million metric tons)
		2011-12		2010-11
		Dec	Nov		Dec	Nov
Wheat		208.5	202.6		199.8	196.1
Corn		127.2	121.6		128.3	129.0
Soybeans		64.5	63.6		68.4	68.4
WORLD PRODUCTION (million metric tons)
		2011-12		2010-11
		Dec	Nov		Dec	Nov
Brazil soybeans		75.0	75.0		75.5	75.5
Argentine soybeans	52.0	52.0		49.0	49.0
Argentina corn		29.0	29.0		22.5	22.5
China corn		191.8	184.5		177.3	177.3
Australia wheat		28.3	26.0		27.9	26.0
Canada wheat		25.3	24.2		23.2	23.2

Take a look at the production numbers from the latest WASDE report...........now remember...........many think Brazil's soya will land around 72 now.........Argentina may struggle for 50.............Argentina corn is in trouble, and I am sure Brazil is too........and that China number, well most think it is closer to 187............

Now take a look at the carryout  numbers for US........corn and soya up slightly, but those are based on a big cut in demand that is not necesarrily showing up, thus the USDA will likely have to revise..........and either way they are as tight or tighter than LAST YEAR and last year was bullish........

Now take a look at the world numbers..........corn and soya are both lower than LAST YEAR......

Now think about this, pretty much everything in those numbers are overstated............and it still looks bullish in its own right.........now take the reality that the production numbers are probably not anywhere near close, it only makes things more bullish........

As mentioned many times, the balance sheet has been fleeced with reduced demand and inflated supply to make it kind of work..........those two things are heading down a track at 100 mph about ready to hit head on..........thats why this thing is bullish.....

[sw363535]

in the back of some of our heads------at least mine.  There is a possibility that the real US supply is going to reveal itself to us in odd ways as usda remains in denial.

I agree SA climate is not a reality yet( my term still a rumor) and the small adjustment numbers are what I would expect this early. But that buy the rumor stuff has merit.

real supply affect---------It ain't cookies till the bakin's done.

Exports were not enough to push the market yesterday.----IMO

It is possible we got a little boost in market yesterday from the pipeling suction from tight movement and not that much being offered till next week. ------------back of the head thought---a little early

And your right BA----IMO----the down side of harvest in a below average production year may have been a little overdone---this might be correction.

[sw363535]

thanks mizzou,

I always lean conservative for fear of emotion trading.  But I read you because I like the way you try to factually support what we are seeing.

I have to say 2012 has a more than average opportunity to be a volatile market year.

AND----if this drought south of I70 returns, we may see some governmental attempts to impose some unpresidented controls on the the commodity markets.--- It would not suprise me from washington.

[Palouser]

There won't be any controls on grains. We are still a producer in excess of our domestic needs. In the end it will be global issues that will determine price.  The last attempts at controls were Nixon and Carter, when he employed an embargo against the Soviet Union in an effort to punish the Soviet Union for invading Afghanistan that was inadequately supported by allies.

[sw363535]

yes, that was in my mind  as I wrote.

Ineffective in the long run to the world grain market,  But plenty of local damage done short term..

[Canuck_2]

Thanks MT and everyone.

I was not getting into the whole world picture but just looking at the numbers published in a marketing newsletter I get where they quoted a Dr. Michael Cordonnier estimates and listed last years production.

Those numbers, as I wrote above, left me puzzelled at the markets reaction since they indicate there will still be an increase in production from South America even with the dry and heat.

Perhaps the market had already reflected the original prediction so had to compensate for this rather small reduction, perhaps the 'market' knows something that we do not know yet, perhaps it is just the old buy the rumour sell the fact.

Just left me pondering my position with not much sold of 2012 and not enough of 2011.

Time to take a bite? As Kraft says does not hurt to sell some when the price is profitable.

We will all be much better marketers of 2011 and 2012 crops by Jan 1st of 2013.

BTW I googled  Dr Cordonnier and found this site http://www.soybeansandcorn.com/

You can read some of his numbers there

[k-289]

I'm still trying to figure out how we can sell $6 corn here + freight to China and then feed it as a feed grain making their dairy or pork production costs at what figure and then sell it to a population making  $3 / day?  What is the cost of a" big mac" in china or kentucky fried chick ?   Soon it could be like the US auto indusrty in China ---full of tarriffs --- lots of unknown's---

[sw363535]

1. the exchange rate is a lot of it.  the dollar has been devalued so much that $6 corn now is where 3.5 corn was a couple of yrs ago.

(if u look at markets with the thought of dollar value, at least a portion of the 2008 run up was just fueled by devaluation of our $.)

2.  China is flush with dollars because of the trade inbalance and needs to get what value they can.

3.  u r talking about a population of billions.  it just one third of them are making enough tohave a higher standard of living(they are buying nearly as many cars as americans),  then those with $$ to spend for better food out number the total # of Americans by 3 or 4 times.  short  version ---its a huge market even if 2/3 of them are still in poverty.

4.  food is not expensive-----remember  they do have a cheaper labor force.  If a loaf of bread costs $2 in the US we accept the fact that 80% of that cost is not ingredients.  How much could we pay for a bushel of wheat if there was only 30 cents of non ingredient cost.  My guess is we would could have cheaper bread even at $20/bu wheat -- if the lady down the street would make it for 30 cents a loaf.

short form -------- the upper income portion of that society has the advantage of that cheap work force as much as we do.----same with meat.  cheap production costs without expensive regulation can afford to pay a lot more for grain.

also they are a big produceer.  They are not buying a big % of their grain.

just some thoughts.----------------I don't mind correction if I am off on assumptions