Corn Prices Near Record On Plunge In Corn Stocks, China Use Surge, Tightest US Corn Supply Levels In 15 Years

Tyler Durden's picture

So much for transitory inflation as corn prices are again pennies of a fresh all time high. Earlier today an update by the USDA showed that corn stocks will come in much lower than expected at the end of the 2011/12 marketing year at just 695 million bushels: this is far lower than the analysts consensus of 771 million bushels. The spring weather was blamed for the drop: "cold, rainy spring and flooding cut U.S. corn plantings by 1.6 percent, will reduce the harvest by 2 percent and will keep U.S. corn supplies at their tightest level in 15 years through the fall of 2012, the government said on Thursday." Another factor for the record price: surging China demand: "USDA also forecast a hefty increase in corn use by China -- up 8 million tonnes, or 5 percent, this year and up 13 million tonnes, or 8 percent, in 2011/12. China will draw down its stocks rather than import corn, USDA said." Just like in China where record droughts have been replaced with deadly floods, the weather continues to be unusually volatile, not just in the US: "Besides plaguing the eastern Corn Belt, rains and
floods have slashed the rice crop by 5.5 percent since May, USDA said.
Drought in the Southwest would reduce the cotton crop by 1 million
bales, or nearly 6 percent, to 17 million bales, and the rice crop, at
199.5 million hundredweight, would be the smallest in four years." This is probably the latest data the market needed to completely ignore today's worse than expected initial claims data, and go into full "Inflation: ON" mode. In other news, expect Obama to announce the launch of an Adverse Weather Task Force investigating speculative movements in air masses momentarily.

More from Reuters:

USDA projected the corn crop at 13.2 billion bushels, a record but 305 million bushels -- 2.2 percent -- lower than its May estimate. With high demand from ethanol makers, livestock feeders and exporters, consumption will exceed the harvest and the U.S. stockpile will shrink.

Traders said corn futures prices would rise by 10-20 cents a bushel because of the forecast of tighter supplies.

"USDA must feel comfortable we are going to lose acres, based on satellite (imagery)," said Jack Scoville, analyst for The Price Group. "We know we're going to lose the acres; it just depends how much. They didn't put them in beans."

The corn stocks to use ratio, a measure of supply, would be 5.4 percent this marketing year and drop to 5.2 percent for 2011/12. Both are close to the 5 percent ratio of 1995/96 and represent razor-thin supplies.

"Planting delays through early June in the eastern Corn Belt and northern Plains are expected to reduce planted area, more than offsetting likely gains in the western Corn Belt and central Plains where planting was ahead of normal by mid-May," said USDA.

It projected corn plantings of 90.7 million acres, down 1.6 percent from farmers' intentions, and harvest area of 83.2 million acres, down 2.2 percent.

USDA estimated the winter wheat crop at 1.45 billion bushels, up 2 percent from May. Traders expected a 2 percent drop. "Improved weather conditions during the past month in the upper Great Plains resulted in higher forecasted yields," said USDA.

Blame the evil speculators for the chart below:


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Nolsgrad's picture

I am cornholio!

mfoste1's picture

tp has went up substantially too

TheTmfreak's picture

Meaning he has a very dirty bunghole.

CPL's picture

I have 140 acres doing nothing....sigh...too late for corn though.  For all of us.

Therefore.  Short the crap out of general mills until next year or go long dog food.

mayhem_korner's picture

Where's the "peak corn" crowd...

RockyRacoon's picture

How 'bout the corn bubble?  You can't eat... never mind.

Ag Tex's picture

They are with the Chinese shopping for food companies in Europe.  If the Chinese elite hate their own people and don't care if they starve, why are they so concerned about purchasing food companies?

http://online.wsj.com/article/SB1000142405274870435530457621468364022512...

mayhem_korner's picture

Control the food = control the people

Whizbang's picture

corn farmers are being payed not to plant in mississippi right now. This is a planned shortage. No more, no less.

NotApplicable's picture

Don't forget that worthless, engine-destroying ethanol that is not only subsidized, but mandated.

Because as we all know, burning our food supply (along with the last 6 inches of topsoil) is far preferable to using dirty, foreign oil.

Now, any of you statist's out there, keep telling yourself how this is all good. I dare ya.

FreedomGuy's picture

Given record high corn prices does this means we can now stop corn subsidies? Can we stop giving more public money to farmers who are having their best years ever? Where are the fiscally conservative Republicans? Oh, wait, many of them are farmers and farm states, too. Government money is bad for YOU but not them.

Flyingtrader's picture

No...no they are not.  I don't know where you are getting this but it is wrong.

CPL's picture

I can't plant because there was too much water on the fields.  100 acres = 40k in seed.  nobody is growing because they can't eat 40k fool.  Fucking retarded suburbanite slobs, swear to christ they think the farming industry is that regulated.

 

Yes assholes get paid not to plant.  BUT IT"S SPECIFIC PLANTS.  Corn is an open opportuntity because it's a fickle bitch.  Any fucker can grow tomatoes, cucumbers...corn though is a wicked pain in the ass when trying to grow it in metric tonnes.  Roses are easier, at least they don't demolish the soil and force a one on one off cycle.

 

This year though.  The soil, my soil is going to weeds and clover.  Too late to plant anything.  Ottawa valley makes around 60 billion tonnes of your breakfast, beer, meat filler, orange juice stablizer, etc... worldwide.  Thought food prices were bad last month.  Wait until Oct.

 

Dumbass.  People are so fucking hung up on putting 10% of the corn in gas tanks they have ZERO clue what corn is used for.  Like condoms...guess what...corn in that.  Like coke...guess what the can and the sweet water have in common?  Corn.  Anyone wiped their ass lately?  Guess what...corn starch is used to hold that paper together so your fingers don't touch your ass.

 

That's corn.  There is a reason it's a commodity.  It cleans you, feeds you and even make bug traps happen to poison things.

StychoKiller's picture

Still time to plant soybeans...

ziggy59's picture

All transitory speculation due to those futures speculators

thriftymost's picture

Not entirely true.  Temps are too low for corn: hear James McCanney, the world's leading living scientist, talk about crop failure in his last week's radio show: http://jmccanneyscience.com .

The bigger picture is Global Cooling.  See http://www.iceagenow.com .  We're right on schedule for the next ice age, and so expect to see more of the same, and then some, in northerly latitutdes.

TideFighter's picture

15% of my gasoline just went higher.

pods's picture

While simultaneously ruining my second new catalytic converter.

pods

SilverFocker's picture

Which beggs the question. What will be worth more in the end, a bail of cotton or a bail of dollars?

duo's picture

Can the fibers of FRN's be recycled into clothing?

Jack Mehoff's picture

Slowly the grips of manipulation start to falter.

silvertrain's picture

Sugar is also on the launch pad..I have been watching that for awhile now along with Lumber..

Mentaliusanything's picture

Oh Japan needs lumber - Lots of it ,millions of cubic feet. Glass, aluminium and insulation as well.

What it does not have is a hope in hell.

Need to send Obama over and give them that hopey changey thing

etrader's picture

Hugh Hendry' will be happy this week.

His long corn / short Olam

djcando's picture

Let them eat Popcorn!  Watch out for the backlash from hungry citizens.

RockyRacoon's picture

Has Frito-Lay broken a sweat yet?  I don't follow the stock but I do like their Scoops.

mayhem_korner's picture

Should be coming out with a Scoops 4-pak for 99 cents...er that's chips, not bags...

RockyRacoon's picture

That'll work.  Then they can package bean dip like they do Cheeze-Whiz.

pazmaker's picture

as much as corn is used in animal feed...look for tyson and smithfield to break a sweat as well.  They have probably locked in some futures at a lower price but overall the rise in grain cost effects most protein(animal source) prices as well.

mayhem_korner's picture

Corn is the be-all feedstock in industrialized food processing...

http://www.foodincmovie.com/about-the-film.php

Jason T's picture

got a good size garden this year..gonna build a chicken tractor to house 3 or 4 hens soon too.  will have year supply of string beans thats for sure.  

being food and energy self sufficient is a good investment!! 

Note to self's picture

Ricght there with you.  Just took delivery on 13 layers for the coop I built last summer - so far so good.  Corn is 8 inches high - planted it in the old 3 sisters method.  Lots of drying beans and winter squash.  25 lbs of Kennebec potatos in the ground.  Currently fighting with anonymous mice for the ripest strawberries.  

More than anything, it takes my mind off of this hugely troubled world.

Boonie's picture

f'in bunnies have been going to town on my pole beans this year.  still have some in freezer from last year.  breaking out the .22 LR, as the putrid smelling spray stuff isn't working and dog only cares about squirrels.  wife and kids will just need to understand.  suburban neighbors won't have a clue what that sound is.  wonder what impact this corn situation is going to have on white tails come November? 

justtotaketheedgeoff's picture

Drove thru Indiana to Michigan ten days ago.  It was a little disturbing to see hundreds and hundreds of acres, mile after mile of fields completely untouched because of all the rain.  Then there was a dry spell and the farmers could finally get out in the fields. The farmer near me had two helpers and was working 18 hrs a day for three days to get his fields planted. No kidding, I saw the lights on his tractor at midnight one night. So, the crops are in.  I was talking with another farmer and he said that 100% of his corn crop is contracted to the nearby ethanol plant.  So much for food inflation calming down...

Caviar Emptor's picture

Yup. I've seen footage, but it's good to hear some corroboration. Winter wheat was badly hurt. Awful weather conditions persist. 

People rail against corn-based ethanol. But at least that's domestically sourced (money flowing back to the economy, better energy security). What they fail to see is that without the ethanol dilution in gasoline, we'd need to import even more, at higher cost and with less independence. 

duo's picture

good idea.  It takes about a gallon of gasoline to make a gallon of ethanol, a wash at best.  Irreplaceable topsoil and oil are consumed forever. 

pazmaker's picture

+10000 duo.  Ethanol is part ofthe problem not part of the solution.

trav7777's picture

corn ethanol is an abomination.

Other plantstuffs like sugar cane actually produce at positive EROI.

Corn ethanol is just effing proof the government is a total fuckup at whatever they do and everything is graft and boondoggles

mlbs's picture

And of course there is always the possibility that weather in the midwest will be like last year. Around the end of June last year we stopped getting rain and barely saw any through October. We were fine then because our crops had all been planted and were already as tall as they needed to be. If the same happens this year the outcome will be very bad.

HungrySeagull's picture

Take that corn, ethanol the damn thing and burn it all.

What do you want? Gas to go get food which is being burned off in the Nation or food to eat and honest to goodness leaded gasoline that is so good for our engines.

 

Stop converting corn for something other than food and you will see a instant improvement in the overall situation.

Cathartes Aura's picture

while I agree that food should not be used to fuel motor vehicles, particularly mandatory use - the majority of corn grown in amrka is GMO, and not really fit for human consumption - it's primarily used to gum up your engines, fatten your meat animals, and for high fructose corn syrup, another apparently "mandatory" ingredient in corporate fud-stuffs, since it's hidden in virtually everything packaged.

soybeans, corn, potatoes, sugar beets - all overwhelmingly Monsanto-fud now.

urbanelf's picture

It's the cornflationary end-game, bitchez.

swissinv's picture

This proves that strong weather can even beat the bigest deflation -> but the sun will come and a strong dollar will arise -> god bless my fairy tale 

Note to self's picture

High Fructose, bitchez!!

quasimodo's picture

Here in the western part of Iowa the crop looks like shit compared to what it usually does. Late getting in, and it will be late getting it out, IF the snow stays away. Yields will be waaayyy down from normal.One goofy weather pattern here lately. Yesterday was hotter than a bitch, this morning I woke up and put a jacket on.

Chasecran's picture

transitory...I see

Quinvarius's picture

It is almost as if interfering in commodity markets to keep prices articfically low reduces supply.  I don't know.  I watch a lot of TV and I don't really believe that is possible.  It can't be.