Is Corn a Mature Bull Market?

[errolanderson]

There a lot of debate on where corn
prices are going to head in August. But
we are sensing that this market is
becoming a mature bull market.

Brazil corn is now being discounted as
much as $40/MT at the Gulf which has cut
U.S. corn exports substantially. Also,
Black Sea corn is apparently also
entering the U.S.

Also, open interest is starting to
decline. Open interest is like the gas
pedal of the market.

But there are many that state further
yield reductions lie ahead.

Appears that Big Ben won't announce a
3rd round of 'world saving' juicy money
printing this go-around either. The ECB
Pres has pledged to save the Euro, but
so far looks like rhetoric. We'll see
tomorrow when the ECB meets.

[SASKFARMER3]

Early corn yields just in 46 and 39. No
thats not HRS yields but corn in top corn
state. Me thinks the world will be short
for the next few months.

[samhill]

U.S. corn exports strong in spite of lower corn
yield expectations.

http://www.ams.usda.gov/mnreports/wa_gr101.txt

[charliep]

Just curious on your yield numbers. May be the case for specific farms in the drought zone but most industry average corn yields are in the mid 130 bu/acre. That will give a corn crop in the 11.5 bln bu range, about 2 bln bu less than forecast consumption in 2012/13. Significant rationing will have to occur with the question of what price will make it happen. That is the reason we have $8/bu corn.

Cow numbers will continue to drop in the US with forage/pasture shortage as a big a factor as high feed grain prices. The number of animals that will come to market over the next six months will mute the impact of smaller meat supplies but 2013 will be an interesting year as US meat supplies tighten up. The renewable fuel standard may also change after the presidential election. Consumption will get trimmed - has to. The real question will be the long term impact on demand and strong likelihood US farmers will plant 100 million acres in 2013. Yields? Two crop disasters in a row?

Wheat has and will continue to displace corn in rations. High prices will make for increased production around the world (assuming mother nature cooperates). Will have to read the book called the "Black Swan". It is not the expected that will bite you but the event you didn't plan for.

[charliep]

The book is actually "Fooled by Randomness".

[dmlfarmer]

Roughly 5 billion bushels of the US corn crop goes to ethanol production. So the projected shortfall of 2 billion bushels could easily be made up by reducing the amount of corn flowing to fuel. The simplest way to do this is for the government to set aside for 2012-13, the mandate that US fuels must have a percentage of ethanol.Suddenly you have 5 billion bushels of corn that no longer has a market. Watch all crop prices drop when 1/3 of the US corn crop is no longer needed.

This will happen. The world and the US simply cannot afford $8.00 corn. Food inflation, especially in an election year, will force the government to take some sort of action and removeal of the ethanol mandate is the simplest, quickest, and easiest way to cut corn demand and prices. Sure, removal of subsides for ethanol would also work, but would be much slower and the political fallout would be much greater as plants close.

As well, the US is facing a massive crop insurance and revenue protection bill with corn at $8.00. If corn prices are reduced prior to payment estabishment, the insurance claim could also be reduced. Given the economic reality in the US, reducing the windfall of farmers is much more attractive than hurting the pocketbooks of the 98% of people who are not selling corn.

[errolanderson]

Informa Economics corn yield estimate was
134 bu/acre released last week.

Weekly export numbers released tomorrow
will be interesting. Last week, the U.S.
imported more corn than exported.

[bucket]

Importing corn and there isn't a supply
problem. Say that three times and keep a
staight face.

[SASKFARMER3]

Charlie farmers combining their fields notBS math
experts guessing. It's worse than you think.

[errolanderson]

bucket - there is a supply problem and
there is a price problem. The market is
trying to balance itself.

[SASKFARMER3]

And Canada ain't that shit hot either for yield.

[charliep]

I try not to play the how much production scenario and instead focus on the demand/consumption side. Consumption will have to be rationed with long term implications (demand distruction). One extra cow slaughtered equals 2 tonnes/years less feed grain consumption over a period of at least 2 years. Backing off the ethanol mandate. Supply response with 100 million US corn acres in 2013?

Won't second guess western Canadian production but we are in a good situation from a replacement side to supplement what won't be provided by the US. We are not that a big a players. The 2 million tonne shortfall in corn production(you tell me bigger SK3 although I would push you on a source) is equal to 50 million tonnes or equal to the entire western Canadian crop production (oilseeds, cereals, pulses).

[charliep]

Number challenged on corn by 3 zeros. Should be 2 billion bushels.

[charliep]

I will do something novel in here and highlight curent prices/charts. All markets seem to have headed into a trading range/holding pattern with todays value at the bottom end of the range. Suspect the support area will hold in the short term but will be interesting to follow long term. The million dollar question in my mind is whether the breakout will be higher or lower. Early harvest both sides of the border will mean the supply side will be sorted out shortly. The question will then be the demand and how buyers sort themselves out in the new price world. Stay tuned for some fun and the unexpected.

[SASKFARMER3]

Charlie you side with grain companies and I'll
believe the farmer. Yes I agree we will fill the
voids out their with all our production. Problem I
always have is rose colored glasses on Canadian
crop. Just had a chat with a fellow farmer close to
our side. Couldn't believe all the shit happening to
our crops yet same bs it's great.
Oh well if you keep telling yourself things are
great sooner or later you believe it.
Berta are on the war path west and north time to
hit Lorsban, maybe some experts are out crop
checking,