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John_Walter
Advisor

'New normal, $7 corn'

Tyson Foods' CEO James Lochner told investors this week that his company used the recent break in corn prices to cover most of its feed needs through the summer, according to a Dow Jones news story.

 

"After getting hammered by a volatile corn market in 2008, the company has since employed a more conservative hedging strategy, buying call options, which give the company the option to buy corn below existing market levels should prices rise," the report said.

 

Lochner believes high prices will persist. "I think we're into a new normal with $7 corn, and that strong relationship with corn and crude oil," Lochner said.

 

Bill Lovette, chief executive of the poultry producer Pilgrim's Pride, agrees, saying that $6.50 to $7.25 "feels like the new normal. At prices above $7.25, corn demand has waned."

 

Smithfield Foods, though, apparently disagrees. Bo Manly, the company's chief financial officer, said he believes corn prices could ultimately settle in the range of  $4.75 to $5.50.

 

Who do you think is right?

 

John

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4 Replies
p-oed Farmer
Senior Contributor

Re: 'New normal, $7 corn'

John..... You know that farmers ALWAYS go with the higher #.......:~)..... p-oed

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rightone
Senior Contributor

Re: 'New normal, likely be in the

$4.85 to $5.85 cash range for 011 ( keep in mind....the areas with crumby basis are much larger than the decent basis areas now ).

 

Long term trend though is higher....say corn follows wheat and beans last half of 012 ( say some $8 to $12 corn in 013 ).

 

Leader of the deal should be wheat and beans for 011...say 50% net up wheat, 30 to 40% net up beans ).

 

Corn...say 90 million harvested at 161 +.   14.4 to 14.5 B is plenty to go around.

 

After June the USA really gets into much lowere cattle numbers ( from the 2 to 5% cowherd declines for each of the past 4 years ).

 

Means significantly less internal use for ddgs.

 

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dapper7
Senior Contributor

Re: 'New normal, likely be in the

mark, first off, no way we harvest 90 million acres. and second crumby basis? we have had 40 cent basis at half the price or much less. the current basis at my local coop is .38 in line historicly but cash corn is 6.27. 

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DW11
Veteran Contributor

Re: 'New normal, likely be in the

Rightone,

 

You are predicting 90 million harvested corn acres for 2011? 

 

We harvested 81.5 after planting 88 million acres last year.  USDA is predicting 92 million acres planted for 2011.  So on 4 million more planted acres for 2011 you are predicting 8.5 million more harvested acres?   Not a chance.

 

Or are you predicting 96 million acres of corn planted for 2011? Not a chance of that either.

 

As I understand it, USDA has predicted about 1 million more corn acres in the Dakotas for this year.  I don't see it happening because of the late spring.  We had a nice spring last year.

 

We could have a harvest of 161+ or less than 155. 

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