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Veteran Contributor

Re: So, The USDA knocked over 1 billion bushels off of the corn demand side of things......

Few doubt that some ethanol plants will shut down due to the current corn price but some plants probably covered part of their needs to get to the New Crop (NC) supply earlier this year with call options or some sort of futures strategy. Many plants have commitments to end users that may last until the NC supply improves and could have coverage in place for this price advance.

Ethanol demand in the 2012/2013 year was lowered just 100 million bushel in the July 11th report and most likely will fall further in future reports if prices stay at or above current levels and crude oil does not rally sharply.

Most people realize that a loss of supply must be offset by lower demand as the pipeline will never be completely empty. Someone somewhere will always have bushels on hand. The key is that it usually takes higher prices than the market can bear or a new government ruling to lower demand.

 

What will get really interesting will be the added demand loss needed if USDA lowers their harvested acres % to a more realistic 86-87% level in a future report. Without dropping their yield any, this would result in around 700 million of less supply.

It is important to remember that in other drought years,  we normally see a much lower harvested acres level.  In 1993 - 85.9% of the planted acres were harvested, 1988 saw just 86% harvested, and in 1983 this figure was 85.5%.  I do not see them dropping the ending stocks below 650-700 million bushel no matter how much of a drop in supply we see.

Just something to keep in mind on future reports starting with the August 10th crop report that will have USDA field information included in the yield calculations.

 


 

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Veteran Advisor

Re: So, The USDA knocked over 1 billion bushels off of the corn demand side of things......

Well said, ag678.....

 

at some point folks have to come to the realization you just described...

 

and it doesn't have to mean that corn stays at $ 7-8 all year long

 

we can be out of corn with a $6 price just as easily as $9....

 

it it's not there, it's not there, no matter the price...

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Veteran Advisor

Re: So, The USDA knocked over 1 billion bushels off of the corn demand side of things......

thankyou CitiFarmer for the drought yr comparisons!!

that does make sense.

USDA just doing what it ALWAYS does - gradually adjusts balance sheet as growing season progresses.

 

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Honored Advisor

Re: So, The USDA knocked over 1 billion bushels off of the corn demand side of things......

I'm not following the logic,  Demand stops when there is no supply????  Supply never goes below 0??????.........

 

So I don't have to worry if I over contract bushels and don't raise it, the demand will dissapear and the commitment will go away if there is no corn.

Or if corn is sold on contract to china but not enough is in open storage or "the pipeline" is full but just too busy to load the contract----the demand will disappear.

Or there is no demand for grain in a country that cannot raise its needs, because grain is not there.

 

or John Deere tractors will not have demand if they don't make any.  

 

 

There is always Demand or we would not attempt to raise it.  

 

Best analogy I got---------------The wife goes to town for a thing.  Drought year and only one store has it and only one on the shelf.  Three others trying to buy it.  Advertised at $40, Owner wants $55, says it will be $65 by next week.  Wife and other three go home empty handed.  Demand is still there, just not at $55.  Chances are one of those 4 will buy it at $30 when the inventory gets old.-------------------I live with her, DEMAND is still there.  And an "expert" telling us demand is gone when none are sold in a time period,,,,,,,,,,, is just helping to satisfy her demand.------------------------

 

When the 4 go looking for something and there is no supply,  at least 2 will be ordered for future delivery------------That is a negative supply.-----------When next years corn is sold before it is raised,,,,,,,,,,,until it is delivered,,,,,,,,,you have a negative supply.

 

Usda does not change that by ignoring it.

 

 

 

 

----------------------------

 

 

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Veteran Advisor

Re: So, The USDA knocked over 1 billion bushels off of the corn demand side of things......

sw - i think i understand your analogy. i can relate, too. funny, simple way to put it.

     i'm a little slow here, however. r u saying USDA's #'s are just an illusion so we can APPEAR to be satisfying all demand w/ ample supply, no matter what reality is?

  ALSO, do you remember what fundamentally caused Minneapolis wheat to trade up to $24.00 in early 2008??

 

thanks,

 

c-x-1

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Senior Advisor

Re: So, The USDA knocked over 1 billion bushels off of the corn demand side of things......

I'm not sure if I remember correctly, but wasn't it the need for pastry quality wheat that drove the Minn. wheat to those levels?

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Veteran Contributor

Re: So, The USDA knocked over 1 billion bushels off of the corn demand side of things......

C-x-1 The North Dakota state mill had a rookie buyer and he got caught short and panicked. Was a nice windfall
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Veteran Advisor

Re: So, The USDA knocked over 1 billion bushels off of the corn demand side of things......

ah ha, maybe i understand this all w/ sw, Dismal Science & Shaggy88 explanations. I thank all of you!

  So, demand for high end (rare) pastries sw's (everyone's) wife & a rookie (weak hands).

panick (fear), greed - i understand more than i thought.

 

much oblidged,

 

c-x-1  

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Senior Contributor

Re: So, The USDA knocked over 1 billion bushels off of the corn demand side of things......

I don't  care what agency you are talking about..how do you in one report lower production(pretty obvious) and then lower demand 1 billion because you can. They will have to answer to this eventually...MikeM

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Advisor

Re: So, The USDA knocked over 1 billion bushels off of the corn demand side of things......

How it works out is called price discovery.....  demand may indeed fall, but not before prices determine who gets the grain.

 

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