Charlie,
Here is an interesting article on causes of Volatility:
Corn demand high
Mar 13, 2008 (The Tribune - McClatchy-Tribune Information Services via COMTEX) -- Hoosier farmers should find no shortage of demand for their corn this year.
"The demand for corn in the world continues to go up as a feedstock, despite the fact that we are using more corn in the United States for ethanol," Mike Anderson told local farmers and business people Wednesday during the annual Ag Day Breakfast sponsored by the Greater Seymour Chamber of Commerce.
Anderson, president and CEO of The Andersons Inc., said the "disappearance of China as an exporter has been a big deal to so many people. We don't really know with the China stock situation, but almost every year that prices rallied, they've had a little extra to throw into the market," Anderson said. "This year not only has that not happened, they (began) their buying of corn."
With China and other developing countries improving their economy, Anderson said, they understandably want to eat more meat, and more meat takes more feed grain for more animals. The larger population increases the demand for more grains.
Demands up
The increase in demand for vegetable oil, Anderson said, is an interesting one both from a food perspective for cooking and bio-diesel. He says the United States will subsidize soybean oil produced here that is blended just a little and shipped to Europe for use in their diesel fuel, bringing in somewhere between $200 million and $300 million.
"Things that are done to stimulate new markets, to me, make a lot of sense when they are starting, but so often it is very hard for Washington to unring a bell," Anderson said. "The concept that we are subsidizing European markets' gasoline is somewhat illogical to me. The result of that is we have oil prices just absolutely go through the roof."
Prices for a gallon of regular gas Wednesday in Seymour was $3.45.
Anderson said there is no question that the demand for ethanol is a major factor into what is going on.
About 1.6 billion bushels of corn were used two years ago to make ethanol in the United States. A little more than 3 billion bushels will be used this year and within a year and a half, Anderson said, that will probably be up to about 4 billion bushels of corn.
This past year the nation produced about 6.5 billion gallons of ethanol. This year it will reach between 8 billion and 9 billion gallons. Anderson said the capacity of new ethanol plants being built right now, that aren't opened, will create a capacity of about 11 billion gallons.
Anderson said the steady growth and soybean demand throughout the world is "really something."
"If you look at corn going up over $5 a bushel, the escalation of soybean prices is needed in order to bring more soybeans back into production," Anderson said. "Even added over 10 million tons a year of demand for soybeans, we took substance production out this year in the U.S."
Over the last three years, global nutrient fertilizer usage is up by about 20 million metric tons. Anderson said that is more than double the annual growth rate of the previous 10 years.
"That growth rate is almost like adding another corn belt's worth of fertilizer usage to the world's consumption in a three-year time frame," Anderson said. "That is a huge deal, and the fact is that the industry, which was really suffering about three years ago, is not invested in extra capacity and it's going to take a while to bring that capacity up."
Government policies have had an effect on the market, he said. The Conservation Reserve Program challenged environmental land production that had a lot of support from the green industry.
"Embedded in the CRP is the ability for the Secretary of Agriculture in Washington to allow early outs with no penalties," Anderson said. "We know very well customers that sell to us have land in that program that they say they could get out without a penalty.
"The realities of today are substantially different from when the CRP was established. I hope that sometime in time that might change."
Energy Act
Anderson said the Energy Act of 2007 will dramatically affect agriculture in the United States. This bill has put in mandates to produce 30 billion gallons of ethanol.
The nation uses roughly 145 billion gallons of gasoline in the United States every year. He said it's a mandate that 20 percent of gasoline consumption be basically alternative bio-fuels. The way that's set up, he said, it's likely that half of that will come from corn and the other half from non-developed things such as cellulosic ethanol by 2021.
"I think it's great that we are supporting investment (cellulosic) even though we are in the corn-based side," Anderson said. "I do get concerned with the issue of the mandate. Within the mandate there is the ability of Washington to relax the mandate if they so desire. I think the people that put together this program have failed to adequately consider the fact that we will have the next drought.
"Fundamentally, I think we are in a great new world of agriculture," Anderson said. "I think the combination of oil and fuel and the ability to use agricultural food stocks with the driving surge in protein demand across the world will keep us in a situation where we will have higher than normal prices, have extreme volatility and that's going to drive a lot of pressure on the input prices.
"It's a great time if you've got stuff sold and it produces well and you've got your inputs bought, but for those of us in the business, ... it's going to be a challenging, fun time, a rewarding time, but it is going to be volatile."
http://news.tradingcharts.com/futures/5/3/106133535.html
Here is an interesting article on causes of Volatility:
Corn demand high
Mar 13, 2008 (The Tribune - McClatchy-Tribune Information Services via COMTEX) -- Hoosier farmers should find no shortage of demand for their corn this year.
"The demand for corn in the world continues to go up as a feedstock, despite the fact that we are using more corn in the United States for ethanol," Mike Anderson told local farmers and business people Wednesday during the annual Ag Day Breakfast sponsored by the Greater Seymour Chamber of Commerce.
Anderson, president and CEO of The Andersons Inc., said the "disappearance of China as an exporter has been a big deal to so many people. We don't really know with the China stock situation, but almost every year that prices rallied, they've had a little extra to throw into the market," Anderson said. "This year not only has that not happened, they (began) their buying of corn."
With China and other developing countries improving their economy, Anderson said, they understandably want to eat more meat, and more meat takes more feed grain for more animals. The larger population increases the demand for more grains.
Demands up
The increase in demand for vegetable oil, Anderson said, is an interesting one both from a food perspective for cooking and bio-diesel. He says the United States will subsidize soybean oil produced here that is blended just a little and shipped to Europe for use in their diesel fuel, bringing in somewhere between $200 million and $300 million.
"Things that are done to stimulate new markets, to me, make a lot of sense when they are starting, but so often it is very hard for Washington to unring a bell," Anderson said. "The concept that we are subsidizing European markets' gasoline is somewhat illogical to me. The result of that is we have oil prices just absolutely go through the roof."
Prices for a gallon of regular gas Wednesday in Seymour was $3.45.
Anderson said there is no question that the demand for ethanol is a major factor into what is going on.
About 1.6 billion bushels of corn were used two years ago to make ethanol in the United States. A little more than 3 billion bushels will be used this year and within a year and a half, Anderson said, that will probably be up to about 4 billion bushels of corn.
This past year the nation produced about 6.5 billion gallons of ethanol. This year it will reach between 8 billion and 9 billion gallons. Anderson said the capacity of new ethanol plants being built right now, that aren't opened, will create a capacity of about 11 billion gallons.
Anderson said the steady growth and soybean demand throughout the world is "really something."
"If you look at corn going up over $5 a bushel, the escalation of soybean prices is needed in order to bring more soybeans back into production," Anderson said. "Even added over 10 million tons a year of demand for soybeans, we took substance production out this year in the U.S."
Over the last three years, global nutrient fertilizer usage is up by about 20 million metric tons. Anderson said that is more than double the annual growth rate of the previous 10 years.
"That growth rate is almost like adding another corn belt's worth of fertilizer usage to the world's consumption in a three-year time frame," Anderson said. "That is a huge deal, and the fact is that the industry, which was really suffering about three years ago, is not invested in extra capacity and it's going to take a while to bring that capacity up."
Government policies have had an effect on the market, he said. The Conservation Reserve Program challenged environmental land production that had a lot of support from the green industry.
"Embedded in the CRP is the ability for the Secretary of Agriculture in Washington to allow early outs with no penalties," Anderson said. "We know very well customers that sell to us have land in that program that they say they could get out without a penalty.
"The realities of today are substantially different from when the CRP was established. I hope that sometime in time that might change."
Energy Act
Anderson said the Energy Act of 2007 will dramatically affect agriculture in the United States. This bill has put in mandates to produce 30 billion gallons of ethanol.
The nation uses roughly 145 billion gallons of gasoline in the United States every year. He said it's a mandate that 20 percent of gasoline consumption be basically alternative bio-fuels. The way that's set up, he said, it's likely that half of that will come from corn and the other half from non-developed things such as cellulosic ethanol by 2021.
"I think it's great that we are supporting investment (cellulosic) even though we are in the corn-based side," Anderson said. "I do get concerned with the issue of the mandate. Within the mandate there is the ability of Washington to relax the mandate if they so desire. I think the people that put together this program have failed to adequately consider the fact that we will have the next drought.
"Fundamentally, I think we are in a great new world of agriculture," Anderson said. "I think the combination of oil and fuel and the ability to use agricultural food stocks with the driving surge in protein demand across the world will keep us in a situation where we will have higher than normal prices, have extreme volatility and that's going to drive a lot of pressure on the input prices.
"It's a great time if you've got stuff sold and it produces well and you've got your inputs bought, but for those of us in the business, ... it's going to be a challenging, fun time, a rewarding time, but it is going to be volatile."
http://news.tradingcharts.com/futures/5/3/106133535.html
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