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Putting The Corn Harvest In Drought And Flood Context
By now, everyone is aware of the incredible increase in the price of corn thanks in large part to the almost unprecedented drought levels across the country. Up another 5% today at over $7.77, the 30-day run has seen prices up over 41%. However, while this is an unbelievable move to record high prices, on a trailing 12-month basis, this price move has merely mean-reverted to the average gain of the last 10 years. From 2002-2011, the average price rise from July-to-July was around $55 and the current July-to-July price rise is only around $75. While things do not look set to improve any time soon for the weather, some longer-term context for Corn may well be worth considering. Furthermore, as Goldman notes the lack of rainfall and extreme warmth has shifted corn yields to the second-largest yield-loss since 1950 (noting that the current 24% rise in the Ag complex is still well below the 35% rise in the 'drought' summer of 1988) and the implications for global inflation are gravely concerning as hopes of China stimulus are impaired.
Corn has rallied dramatically in the last month or so...
but it appears to be a mega mean-reversion from extreme low levels (the orange line is the average price rise for the trailing 12 months for the last 10 years and the black line is current trailing 12 month price change for Corn)...
though the reversion seems well-founded in the terrible reality of the weather...
As Goldman notes:
The agriculture complex is +24% since June 8 due to severe drought conditions in the US. The lack of precipitation and extremely warm weather (which also helped to push natural gas prices higher), caused us to substantially lower our US corn and soybean yield forecasts and raise our price forecasts for both crops as well as wheat. This shift in our expected corn yield suggests that the crop is likely facing the second-largest yield loss since 1950 if we exclude 1983 and 1993 – years with major floods (see Exhibits 1 and 2). In 1988, the US Midwest faced an even worse drought than the current one, and the agriculture index surged by 35% that summer.
But this has dramatic implications for the rest of the world...
As our positive outlook on the industrial commodities, particularly copper, is based upon more accommodative policy in China and the emerging markets, this surge in agriculture prices creates some caution when thinking about the inflationary policy feedback loop. Benign inflationary pressures have given central banks in China and other EM countries room to pursue aggressive rate cuts. However, for many of the emerging markets, food prices still represent a significant share of the overall CPI, which suggests that this rise in agriculture prices could start to pose a threat to the benign inflationary pressures. This is particularly the case for China where food represents nearly a third of the price index. As a result, strong agriculture prices through the policy feedback loop have begun to create a risk to our broader commodity views.
We currently believe that, barring further deterioration in weather conditions this summer, the current production shortfall is likely priced into the agriculture markets. For example, our just-increased corn price forecasts, which embed a more negative yield outlook than the USDA, remain slightly below the forward market prices. Nonetheless, we believe that the recent rise in food prices, especially soybeans, could lead to a 15% rise in the food component of the Chinese CPI, which would translate into a nearly 5% rise in the overall CPI, all else constant (see Exhibit 3). For now, the downward price pressures in other nonfood price components suggest that the recent rally in food prices will not significantly derail the ability of EM central banks to pursue the accommodative policy that is expected to keep demand supported during the second half of this year. The risks, however, have clearly risen with the recent adverse weather.
Source: Bloomberg, Goldman Sachs
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Mother Nature hates Ben too. She's shutting down his printer.
Everything points to more QE !
Nothing to worry. Superb Ben to the rescue.
WTF , where is the Monsanto no H20 super seed. runnin behind on R&D I reckon.
Mother nature loves Ben - she is going to give him an excuse for food price inflation - it wasn't the 1970s anchovy catch failure that caused worldwide food price increases but drought causing a corn price increase that spiralled everything else higher. Everything looked good until corn took off.
Wait a minute! A 40% increase in 30 days due to weather conditions, and we're only at the average using 10 years of data?
Where's the hyperinflation? Fuck, where's *any* inflation?
Two years ago, this same comments section was in a neurotic state of panic, claiming that every bit of food rioting around the world and any supply/demand imbalances in any commodity (I specifically remember cotton) was solely Bernanke's fault.
America = Weimar! Prepare for an imminent collapse! Bernanke killed the dollar!
Will the hyperinflation goons finally admit to being dead WRONG?
Thank God three or four of us were here to call out the lunacy.
Hyperinflation is dead right. As a previous poster indicated, the tinder can wait for a trigger before exploding. This is a market, not a mathbook. Why do 150 penguins follow the first one off the Iceberg when that unreluctant penguin clearly slipped or was pushed? Because they were all going that way eventually anyway and the first one got access to the choicest sardines when he went.
Actually penguins crowd on icebergs until one falls off so to see if there are any predators in the area, mainly killer whales. If the one is seen to be swimming around unharmed, then they all then jump in. Though it does work as an interesting metaphor to which you are speaking.
Miffed:-)
70% of Earth is covered by water. Since we won't have any Peak Oil problems for millenia (if ever) and because Oil is Abiotic and just keeps coming out of the ground, we should be able to build a lot of desalination plants and cover the entire country with fresh water. So what drought problem? There is no oil problem and no drought problem. Just drill baby drill! And we can use the oil not just to haul our fat asses around town in a Hummer, we can also use it to convert salt water into fresh water.
Do I have to do all the heavy thinking about here?
If you are going to troll, you got to be a liitle more convincing...
This looks like someone trying to disprove Poe's Law....
Looks like your Max Fischer username on ZH has only been around since 7/7/2011, this is after May 1, 2011, plus none of your early coments say anything about inflation or deflation. One deflationist has been Mish Shedlock:
http://globaleconomicanalysis.blogspot.com/
Uh, hyperinflation is a loss of faith and trust that the fiat currency of the day can actually be used to pay or exchange it for something outright. The timing of this event is difficult but if you're assuming the money supply is less than say ten years ago, then you're smokin hopium and lots of it. Hyperinflation is the outcome of excess money printing devaluing the worth of the currency everyone was either obliged or forced to accept. Abandonment of the currency as a result of there being just too damned much of it to compensate for too damned much non-written off debt is going to induce a hyperinflationary event, how long it may last is anybodies guess.
Well, duh. There's a difference between monetary inflation, price inflation and hyperinflation.
Here's a hint: Hyperinflation is a repudiation of the currency. That is still, and always will be, a possibility. Especially, if and when the USD loses its reserve currency status. What could replace the USD? IDK. The Euro is definitely out. Gold, SDRs, Yuan? Does it really matter? The USD's days are numbered. I'm starting an office pool.
Monsanto and other GMO corn is cooking as well, but your NonGMO corn is falling over in the fields. At least the Genetically modified verieties will yield something.
Something poisonous.
Oh, right! Because we actually eat row corn... Do some homework on what genetic modification actually consists of.
yes, chew on this seed corn and get back to us.
http://www.youtube.com/watch?v=94d-KVorSHM
GMOs are the most dangerous thing man has ever produced. We altered 150 plus years of patent law to give companies (like Monsanto) the right to patent food. This is about money at all cots and the last thing it is about is health. Most GMOs have LESS environmental tolerance than non. If you think about it, nature's been working its laboratory a lot longer than man. Maybe we should listen to her.
So emulating properties between different varieties is okay when we do it though husbandry but not with crops? I'm fairly certain that's how we developed row crops to begin with. My point is that typical GMO crops go towards industrial uses and feed blending. Sweetcorn is a separate variety used for human consumption. Furthermore, an enzyme produced by one variety of corn being transplanted into another variety of corn doesn't make it toxic OR unnatural. But you're right, it IS about money. Imagine that... abusiness about money.
Of course the way money is being printed off we might as well start peddling in corn.
are you telling us Smith's concerns, or those raised in "The Future of Food" are invalid? Do you think when we transfer "one" genetic quality we only produce "one" affect? No one knows that answer...and that's problem number "one." The reason they lobby their ass off to stop gmo labelling in grocery stores is that it would create an immediate (and necessary) database to track this effect in humans
I read this morning Malaysia released some 6000 genetically modified mosquitos to 'control dengue fever'.
One false move, one stupid moment, and all of mankind will be wiped out. I'm all for genetic research. But the willy-nilly creation of 'mutant mosquitos' and 'disease-resistant corn' will one day be the end of us.
Has anyone notified the bees?
There are no bees anymore...
all the wireless gizmo's are fucking up their internal magnetic compass
"what's the buzz, tell me what's a happening...."
"Why should you want to know? Don't you mind about the future. Don't you try to think ahead. Save tomorrow for tomorrow. Think about today instead. Ooo yeah...I could give you facts and figures...yeah...I could give you plans and forecasts...yeah...all right."
The GMO stuff doesnt do any better in drought than non-GMO varieties, there is vairability in the ability of corn strains to handle heat and lack of moisture but there were drought resistant types long before people started tinkering with the DNA.
Its main claim to fame is that it can soak up herbicides, the biggest market is for the "Roundup ready" types.
Yes, without GMOs, and with the help of mother nature and thousands of years, the Mexicans have produced an amazing variety of corn that tolerate just about any environment. Now NAFTA and the invasion of GMOs are threatening much of it.
Recommend the documentary "The Future of Food" Can find pieces of it on youtube
Why is the chart depicting the July contract when the Dec is the new crop contract that is most affected by the drought that this article is headlining? Chart out the CZ2 and analyze it and you'll get a better idea of price appreciation. The 12/13 crop is more than a $1 higher than its ever been.
Along those lines the last day for trading July Corn was last week. That contract has expired. Sep (CU12) is spot and Dec (CZ12) is top step. I see that the author corrected the ref to $777 corn to reflect that it is quoted in Chicago as dollars and cents per bushel. However you have not yet fixed the ref to the $55 and $75 changes year over year. Those should be $0.55 and $0.75. Rise tracks both the increasing tendency to burn our corn (up from something like 5-10% of crop used in ~2002 to something like 45% of the crop used today) as ethanol as the new oxygenate in domestic gasoline as well as the willful destruction of the dollar.
It has been amazing how fast the crop deteriorated. Another couple weeks and you will actually see record prices, which we have not yet. Record nominal was 799.75 or 799 and the orders June 10, 2011 in the July contract. That was the day I dumped my long corn position at an average of 793.25 and high sale of 797. Unfortunately I kept the short $7 puts which were set to expire less than 2 weeks later thinking that the price could not drop that far that fast. Oops. Not only did I get another 10 July corn put to me, but July dropped to $6.15 from $799.75 in 20 days on June 30. Not sure such a move will happen now as we did not have drought last year like this.
Anywho, the idea that rising ag can cap accomodative policy in Asia is an important idea. Maybe I need to put short copper back on. Would like to know what Benny and the Inkjets intend for Aug 1st though. Will get a good pop if they print. Of course that would only add further upward pressure on Ags going into next year. Wonder if it caps accomodative policy here as well? Or maybe Ben sends someone over to USDA to twist some arms to report bigger crop/higher carryout in the Aug WASDE? Not sure if markets will buy it though.
Isn't that another way of saying food inflation is coming in Dec?
Beef is getting cheaper.
Investors have been easing for the Fed the whole way. The 30 year treasury sits near it's all time low at 2.5%. WTC @ near $90. Stocks are a few percent below cyclical highs.
The longer reflation policies persist uninterrupted, the bigger the gap becomes between the ceiling and the floor. Distorted price signals simultaneously tell suppliers to ramp up production, and consumers to pair back or choose less costly alternatives. Low volatility and upward momentum tells investors to pile into risk and sell the dollar under the backdrop of a growing between natural supply and demand. Needed fiscal action is delayed.
Suppressing the natural signals of the market is a dangerous game, but, don't be surprised if we end up with an even larger top. The longer this charade continues, the bigger the short.
http://research.stlouisfed.org/fred2/series/MZMV
http://research.stlouisfed.org/fred2/series/GS10
92% correlation. It's a bit tricky figuring out chicken/egg in this scenario, but what I see here is that fed funds is going to be stuck at ZIRP until the velocity of MZM both reverses course and improves significantly. Note that the relentless drop in MZMV also makes a ramp in QE from current levels much more difficult to sell (it never stopped them before, but it would accelerate us to potentially below 1.0 in MZMV).
http://research.stlouisfed.org/fred2/series/WIMFSL
Note also that this is a big reason why the MZMV isn't dropping more quickly (as is illuminated in other Tyler postings).
I thought Ben used soy ink...
It's okay, government made it happen. Thanks to Obama, we know.
Its the 26,000 year precession. Most scientists agree, even NASA, that our solar system just moved into a highly charged, gasous "cloud", that is energized. No one knows what will happen. In fact, look at the rest of the planets in our system, they are ALL heating up. Pluto several weeks ago lit up like a damn Xmas tree as we passed into this energized "cloud". Interesting times. Personally, I believe we will see increased heat, the caps will melt, desalinate the oceans, stop the current loops and then the earth will plunge into a deep freeze, ie ice age...
Who is the doucher who gave me a negative? Would you rather have heard that its all the problems of the non-green people? Thus assholes like you who drive the prius are saving the planet? ..and that Al Gore was right - PEOPLE are the problem? Bwahahahahahahaa...
If that is the case tell me why the other planets are heating up as well? Are Aliens responsible for this?
Wait, your'e the idiot that thinks we can shit gold out of the CERN colider. I guess it's nice to see you're consistent.
They absolutely can you uneducated Troglodyte - so whats your point? We are on a different subject...
I see you google a big word. Good for you.
The point is, that you believe in science fiction fantasy bullshit you read on the internet-and that you are a fucking moron. And just because we can make a few molecules of gold for eleventy brazillian dollars, doesn't mean we can just shit the stuff out.
Unlike you, I had no need to "Google a big word", unlike you, I am highly educated. Oh, and here is a tid bit, its not fucking fantasy asshole, 100% fact - heard 1st hand bitch - from the source! How do you like those sophisticated words?
I believe the CERN collider can create gold. Can it make an ounce for less than $1589.450/oz? Not likely. Also *tidbit.
I think you need to stop reading Buck Rogers....
http://www.agweb.com/agweb_crop_comments.aspx
some comments by farmers from agweb.
yes remember this people, the creator and nature are on our side because they are against bernanke, this system of bullshit and those that love it and defend it. Natural ecology doesnt rely on CDS and other garbage credit devices that enslave the greater sucker. Theirs is a foreign system compared natural checks and balances based on material and energy translocation. (i.e. silver gold food labor)
all things will be put into order, and even if we are gone when that happens, our system of ideals wins agaisnt unjust aberration, it always does.
global warming effecting weather patterns, and climate change
'They' can control the weather.
Not in any precise way, they can't. They can't even predict the weather with any great accuracy past about 40 hours. And fine control over it is orders of magnitude more difficult than that.
Actually they can. They do conduct experiments with highly charged energy beams into the upper atmosphere. In fact a Congressman on the Arms Committee, a while back, admitted while giving a speach that advanced foreign nations have this capability as does the US.
They "DO" control the weather. But to a point. For any one not familiar, I suggest Googling Piers Corbyn. Watch a video or two of his, check out his weatheraction.com site.
He is predicting a global mini-ice-age (yes, opposite of the AGW bull-shit), a global cooling (net). Plus, as he eloquently explains, the SUn has a LOT to do with our weather. Much more than meterology gives credit for (Sun+Moon gaviational/electromagnetic impacts).
Quite enlightening as to what is coming. And if you don't mind speculating on food, it's a sure bet, just karmically odd, if you get my drift.
Food and water.... too little of the first and too much of the wrong energy of the other.
UK Flooded, US Burning...
Trippy times...
death-by-a-thousand-slogans
There's definitely climate change. You'd have to be blind not to see it. I'm still on the fence about whether humanity is having any great effect on it, though.
Personally, I think Mother Earth has finally given up on the intelligent ape experiment, because it's quite plainly not working. When a species persistently shits where it eats, you know the game is ending.
Record amount of solar flares/eruptions this year; does a lot more than us monkeys scrabbling around.
Our sense of self-importance tends to make us like little kids - we cause everything and the world revolves around us (egocentric).
It's weather; we didn't cause it, we can't change it - just have to deal with it.
Societal hysteria about "high" temperatures that are no different than they have ever been.
There were plenty of 100 degree days on the East Coast 30 years ago - but there wasn't all the hysteria.
We are losing our collective mind in more ways than one.
over 28 thousand record high temps set this year alone in the US, and Summer is barely begun.
And the odd thing about many of those records, is they were set in the last Depression (ie. 1932-1937).
All we need now is plauges of locusts and a dust bowl.
With all the Prozac and such in the water supply, swarms of locusts may never occur again.
If they do show up, though, we might be able to settle them down by crop-dusting with SSRIs, though. Heh.
Should the NE start preparing for CAT 1-5 hurricanes [?]
...or, an ole fashion 'Dust Bowl' in the breadbasket ?
Record highs since when??? Since records have been kept? Last I checked, the earth was more than 100 years old.
Yes, and the accuracy of temperature measurement is little more than 100 years old.
Even modern instruments vary by several degrees yet 1/2 of a degree supposedly = man made global warming.
Stewardship and preventing pollution YES, by all means; hysteria and species egocentricism NO.
And that is why they deal with "anomalies" when analyzing the data....
Or do you think the scientists didn't think of that one already?
My fuck, either you think these guys are incompetent, you have no idea what they actually do, or you have an overblown opinion of yourself....
My money is on a combination of all three possibilities with the last two dominating....
Basically record highs since H. Sapiens walked the earth, and that is all that matters....
And based on what C02 we have pumped into the atmosphere and what C02 we are commited to pumping we are about 1/4 of the way along the path....
"Looks like we are in for nasty weather..."
weatherwise is such a cuckoo day..."
The Romans grew wine grapes in Britain. AGW is horseshit.
Wow.... that factoid derails all of AGW... very impressive...
I'm curious, any vinyards in the UK currently?
Hint: http://www.ukva.org.uk/
So out of curiousity could you show that Global temperatures were higher then or even show that temps in the UK were *higher* than currently?
1. Thanks for the link, I am now better informed than I was yesterday
2. Maybe http://wattsupwiththat.com/2009/12/04/jo-nova-finds-the-medieval-warm-pe...
Of course climate change must be upon us because this situation has never happened in history. Buying the bullshit are we?
actually this situation hasnt. Globally 9 of the 10 warmest years on record have occurred since 2000. But hey why allow facts to get in the way of your oil company propaganda. Something is indeed happening, whether you believe it or not matters not.
"On record" indeed. How far back do those records go, from which the "warmest years" are selected?
High quality weather records go back about 400,000 years, longer than H. Sapiens has been around....
they always miss that one...then they ignore the data from it.
In my haste, I made a small error, "weather" should have read "temperature"....
The climate changes every nanosecond .... but it is not changed by filthy, degenerate capitalistic men ! Monedas 1929 Self Anointed Holy Ghost Of The Jewish Ether
BOLLOCKS !
Oh well, if you're gonna do Great Depression Part Deux, you may as well re-run the Dustbowl, as well.
Inflation is a Monetary Phenomenon
“We’re in a very unfortunate position to be here,” Richard Duncan, author of The New Depression, warned on CNBC’s “Squawk Box Europe” Monday.
“When we broke the link between money and gold, this removed all constraints on credit creation. This explosion of credit created the world we live in, but it now seems that credit cannot expand any further because the private sector is incapable of repaying the debt it has already, and if credit begins to contract, there’s a very real danger that we will collapse into a new Great Depression,” he argued.
“If this credit bubble pops, the depression could be so severe that I don’t think our civilization could survive it.”
“We could keep deferring the depression, but that could just encourage the bad guys. If you do this, you possibly do more harm than good,” Roger Nightingale, economist and strategist at RND Associates, told CNBC Monday.
“You can defer, but not prevent.”
in full
How Close Are We to New Great Depression?
toiletbowl meet dust
Just another pump and dump. :sigh:
Yeah, another chance to flee everyone again...
The corn in my backyard seems to be growing just fine.
Mine, too. In fact, all the local farms are having good crops this year, with the exception of the multi-thousand acre corporate grain farm a few miles away. Could there be something wrong with their factory farming methods, I wonder?
the states that REALLY produce the big corn yields are in awful shape-IN,ILIowa,KS-not the marginal states
Iowa is not in that bad of shape (yet). Only 18% of that crop was in poor or very poor shape a week ago. Its the 50%+ poor and very poor in IN, IL, KY, and Missouri where the worst damage is.
Monsanto is concerned with patenting GMO that produces non viable seeds first, and bug repellent second..
They forgot the need for water.. oops.
why not square the circle and make corn that looks like a cow? it could walk itself to water and flick flies from its own ass.
don't ignore your ignorance n this subject.
don't ignore the o in your on.
a good friend made the mistake of calling chemical farming conventional.
i reminded him that fertilizer, pesticide, herbicides and GMO farming has only been around for less than 100 years. that modern farming is in fact UN-conventional and has yet to prove itself sustainable.
I then pointed out that 5000+ years of civilization would not have been possible without the wonders of a bovines digestive tract.
It' remarkable, isn't it?
Man builds a machine, and it and it does it's task. And man feels proud. So we have built a lawnmower. Nature built a lawnmower that replicates itself, produces fertilizer, and can be converted into steaks, milkshakes, and shoes.
We've got a ways to go.
Goatskin shoes?
We knew what he meant.
Bullish on self replicating bootleg goat brie cheese from here on out though!
You mean those who are growing corn in the same field for the 4th year in a row, using tons of nitrogen per acre? Crop rotation was first figured out 5000 years ago.
It dpeends on where you live and whether or not you irrigate. Alot of the really big farms do not, and the big mega farm corn states in the center of the country are getting hit the hardest by lack of moisture. I dont have a single grain of sympathy for them.
My Silver Queen this year is delicious, some of them didnt form kernels at the very end of the cob but they are still nice ears. However, I do water them.
mine too but there's just a few and I have a hose where water comes through
New fields all around my neck of the woods. Jammed full of tall corn and getting taller.
Mine is deader than a door nail.
And to think I had been worried about worms
Good for Argentina.
Cue Beavis: I am the great Cornholio!
and i was thinking cheney was the great Cornholio for priming romney to put condoleezza on the ticker to fill out the top neocon spot
IL/IN corn is DONE-end of story-past the point of no-return. Get ready for a HUGE jump in evrything corn related this fall. the farmers around here have been spoiled for years with good yields and they all have brand new Ford F250s and 500K John Deere's and 6K an acre land values-can you say leveraged up to the hilt?
The Kentucky and Missouri crops are done too and Ohio is not far behind. More 100 degree temps in the forecast for Missouri this week too.
I live in Nebraska (i.e. Cornhuskers)
Dryland corn is toast. Irrigated corn is fabulous. States like Iowa are mostly dryland (non-irrigated) So all those farmers who scampered out last year and paid $30k per acre for irrigated ground will be doing great with their big yeilds and high prices.
Just calling as I see it on the ground.
water,... cool clear water? where's the enormous amount of H20 gonna come from - seeding the clouds with fairy dust from a 'ring-of-poison' called Dow/ Monsanto Chemical?
The corn is tall here in NW Illinois but you can tell it's starving for water when the top leaves point straight up to the sky and the edges start to curl around themselves. Dry as a bone around here. I haven't walked up close to check the size of the ear. I will do that this evening when I get home, though.
Wisconsin is rough as well, corn fields are looking terrible, soy still holding up o.k.
1316-1319 great famine... 1345 Florentine Bank Collapse.. 1348-1351 .. Black Death ..
could be worse.. be careful what you wish for.
As I was reading the article I immediately found myself recalling the first few chapters of the Grapes of Wrath.
I don't think the market has fully priced in this drought event. If we get another week or 2 of little to no rain then the drought will effectively destroy the soybean crop too. All this talk of the weather from August 1st to August 21st will determine the soybean crop is wrong---because the crop went in 2-3 weeks early.
If there is no rain, soybeans to the mid-20's is quite likely because the market's function at that point will be to destroy demand.
This will all result in massive inflation in the meat markets by the spring of 2013.
This story needs more attention because its extremely inflationary.
really-the MSM talking about something that would be worthwhile-instead of the shakeups on A. Idol? why do you think that these huge stadiums are now being built similar to the Coloseum being built to divert the ancient Romans from the rot that was occuring around them?
Why anybody listens to GS about the ag trade is beyond me. They have been consistently lagged behind most other private and professional forecasters in terms of yield and acreage estimates since time immemorial. Their commentary on price clearly shows their pedigree as equities traders, perferring to think of grain prices as something that either goes up or down like a stock and ignoring the spread trade and its importance to the ag community.
To say that the trade has priced in the drought is bold, to say the least, considering more of the worst weather has yet to occur in areas that have up until now been spared. This drought is NOT over and this problem has NOT been solved. Repairing the balance sheet in corn and soybeans will be a multi-year task.
As I've said before, this is nothing that some massive short-selling of corn on the futures market can't solve. And in the worst case, the crop reports (and I suppose even the weather reports) can be 'adjusted' to improve the picture. So I really think all this worry about 'crops' and 'rainfall' and other tangible things is overblown. These luddites need to move into the 21st century digital age and get with the new reality. Everything will be fine...
Obumney will get the BLS on to it.
This is something you equites guys need to understand about commodites like corn. They are a tangible thing, you can quantify them and value them in a fashion that you cannot for a stock price for instance. Massage the numbers on your paper all you like. The amount of the physical commodity will make itself know in the counting of it. This drought is serious. Short sellers might want to consult a psychiatrist before executing a trade.
Irony aside, CBOT Corn Futures open interest are clearly in decline. Total open interest in corn has been bleeding out longs for 2 years straight ever since the ramp in mid-2010 which drove corn from around 312 to 750 in short order. So while that run was clearly speculation driven and a major all-in commodity bull market. Both net longs and net shorts are lower than a year ago and more or less unchanged vs a month ago. So this recent ramp doesn't look like it is speculator/fund driven. A synthesis of the open interest, the recent weather and the price chart, implies a thesis of a genuine shortage where people who are taking physical delivery and not rolling over their position are bidding up contract prices based on a real need for the physical commodity. The US is the major player in corn, the "Saudi Arabia of Corn" with 55% of global exports. If the US corn harvest has a problem, the world has a corn shortage problem. So no commodity bull here, this actually looks like a market that is actually functioning quite well in response to supply and demand. If you have expected yields of 200 falling to 100-110 then the price should move accordingly. These are yield falls from a farm in Iowa which harvests the most tonnes of corn in the US.
http://www.cftc.gov/oce/web/corn.htm
http://futures.tradingcharts.com/chart/CN/M?anticache=1342454114
I use these usds tables for world corn production and use, and US grains:
http://www.fas.usda.gov/psdonline/psdReport.aspx?hidReportRetrievalName=...
http://www.fas.usda.gov/psdonline/psdReport.aspx?hidReportRetrievalName=...
Any excuse to leverage the dry nations who import grain will be made, which will send the Syrias of the world into hunger-driven chaos, which will lead to some kind of fangled-up UN-chartered occupation, which will lead to further forward US bases of occupation placed precisely to "encourage trading in dollars aka democracy, humanitarianism, and freedom!". Tough to move gold from Iran to India with all these damn humvees and snipers!!!
If you thought Arab Spring was hot, wait until we hit Arab Summer.
Maybe the obesity rate will finally drop this yr.
In 1988, the US Midwest faced an even worse drought than the current one, and the agriculture index surged by 35% that summer.
2012 will be worse, because the early heat killed pollen. This did not happen in 1988 on the scale it occurred in 2012. More rain will not significantly help the corn crop.
the 30-day run has seen prices up over 41%
At least it is only rising prices, not inflation so Ben can continue printing.
Yes, the experts agree with you...
biofuelsdigest.com that is the "Leading bio-based product news source" says "Corn prices a statistically insignificant variable in driving food price hikes: study", ethanol.org (American Coalition for Ethanol) says "Corn prices do not drive grocery inflation" and of course Fed's core inflation which is used for determining monetary policy does not include corn.
http://www.ethanol.org/pdf/contentmgmt/Food__Water_Watch_Sept_07.pdf, http://www.biofuelsdigest.com/bdigest/2011/07/12/corn-prices-a-statistic..., etc etc
Ethanol and biodiesel groups are your sources? nuf said
Just found it interesting that they agree with the Fed that there is no link between food, corn specifically, and inflation when making policy decisions. To sum up, it doesn't matter if the corn price goes up due to ethanol consumption, because it does not affect food prices, and it doesn't matter if we expand the money supply because it does not drive up the key core inflation metric. Just goes to show how the powers that be runs things. May already be familiar to you.
years back crops was saved in case of next year having a failure allways have a reserve for a bad year including home foods and canning for a surplus, No longer we send our surplus overseas to feed povery so it can re breed again and use food grains for car fuel in the end stupidity will win.
One nice result of the food shortages fewer people will be waddling about with Mc Donald broad asses. so it may be a good thing What does 47 million on food stamps tell you.
Nope - corn has already been plasticized as a long-life multi-use food stuff and it's the third-grade stuff that you get in processed food. I worked for two of the largest flavor manufacturers in the world, some of our biggest customers were the McDonald's and oh what'd they buy but trainloads of artificial meat and chicken flavor. Quality control, baby, same burger all over the world, same meaty flavor and texture, right?
Meanwhile, you can't get two burgers (we'll say high-grade organic) to taste the same off your own grill.
Aisle 9 at Stop-n-Shop is the de facto Corn National Reserve. Shelves and shelves of the stuff in colorful boxes, dosed with B & C vitamins, and combined with corn syrup (another long-term grain storage hedge / price buffer), there is your daily caloric and nutrient requirement for grumpy, carb-addled slave labor.
So Scientific American says 20% of corn is directly used as food. 40% fuel and 40% animal feed. In that the animal feed will be largely live stock for food consumption, that says 60% is food related.
I do not have a number for the 20% food, but it may be that a large % is for sugar use in food. The high sugar yield of most corn grown today is much different than the food quality nutritional corn of yester years. The US Government push for growing and storage facilities of corn for ethanol may become a disaster for the populations. The food supply is tight and the population growing.
No matter how you look at it the weather pattern is not good and may continue for a few more years. There will be prices increases and maybe shortages.
Keep in mind a few points: animal feed can easily switch to wheat, and since everyone and their uncle has been sitting on wheat to capture a carry for years, there is a lot of wheat out there. It may be at a premium to corn right now, but that can and likely will change quickly. Fuel is also flatlining in terms of consumption because we've reached saturation per the renewable fuels mandate. Ethanol plants are barely grinding right now because they've been running negative margins almost consistently this year.
The animal feed is where this is going to really hit hard and send people into sticker shock later this year.
It was already going to be a high priced year for beef after the extra slaughtering going on when it went dry last year; with so much feed corn lying scorched and/or in the fields this year beef, dairy products, and pork are going to command very nice prices in the fall and winter. The slaughter that this will necessitate from high corn prices will carry over into next year also, less babies in the spring when the females went under the knife this year.
On the plus side, it will be good for the grass fed beef market. They are going to have a banner year.
Just ordered a whole cow from an organic farmer in the neighborhood. delivery (in butcher paper) by November. I haven't got a quote on the cost, yet. I might want to firm that up this week.
20% food
Virtually everything crunchy or sweet that comes in a colorful package will have a significant corn component. Some of it has a slightly higher percentage "food" than 20%, but that's a good ballpark.
Glad people are finally catching on to this issue, but that doesn't make most people experts. The issue is not the heat so much as the rainfall. If we'd had normal rainfall with this heat we'd be looking at a record crop. The rainfall issue is primarily a result of a high pressure system that sat on the Mississippi and Illinois rivers most of the summer and broke up storms as they moved from east to west.
While I've been riding the Dec corn futures up since mid June, I don't reccomend people go crazy buying corn. As a physical trader I've seen the basis (demand) in the export, domestinc fuel, and feed markets drop off the face of the earth in the past week. Rationing mission complete, stay long with caution...The fed might announce intentions to print more corn...
Lohn, what is your view on Soybean Oil prices? Is the weather / lower yield all priced in?
I'm thinking that some decent rain will drop it by 7-8%.
George ... The Greek ... From Canada
I tend to be bearish, whish isn't helping with record highs. I don't work directly with bean oils and I'm not sure what state global canola/palm crops are, but beans are a tough plant as we saw last year. The double crop beans may have dies early on but replanted stuff is looking okay, some timely rains and S. American planting intentions could send this thing tunbling down. Long term I believe this corn/bean spreading is sustainable and will be the new normal (thank you renewable fuels mandate) but I don't think the kicker will be yields for beans, it will be acres.
Much appreciated Lohn. Glad to see we are on the same page with ... always good to bounce stuff off smarter people than I.
Stocktwits has a decent Soybean stream here if you ever feel the need to share http://stocktwits.com/symbol/ZS_F
George ... The Greek ... From Canda
Meanwhile the government still needs its FAIR SHARE of corn so that they can put corn juice in gasoline, (ethanol). At least the sheeple will starve for a good reason.
Corn prices are generally quoted as US cents per bushel, which Bloomberg shows as USd with a little d. These are high prices, and the crop outlook in the corn belt is not good as of 7/16.
This is actually a good thing, perhaps they'll stop adding it as a surgar replacement to almost every off the shelf product at your local store.
Sorry, corn is still cheaper than sugar.
that's because ALL foreign sugar is locked out of US markets(Cuba alone would drive the prices down to nothing-and sugar has alot more energy for ethanol than corn). kind of like we could import corn from Brazil but that would mean your local farmer couldn't buy $50K Ford F350s and new JDeere's for $500K with the depressed prices. remember that when Obummer blathers on about China's trade policies
Agree completely. If folks want to complain about synthetic sugars they should look into reducing sugarcane impediments. Another classic case of less government is best government. But If you were a farmer and you could make a "1%er" salary growing corn, or a "99%er" salary growing something else, which would you choose? Many of these old farmers might be stubborn, but they aren't irrational.
Whenever its a record you know it will revent over the course of the next six month as more farmers plant.
Not always of course, but enough so that if your patient, like cotton it will but you a new PC
Let's just print more corn.
The Corn industry has managed to place themselves in almost every other industry in the country. I'm amazed at the sales and marketing job the corn industry has done over the last 50 years, talk about a multi-use commodity - damn! Corn syrup seems as ubiquitous as oil by-products in terms of affected "things". I was in hershey PA over the weekend where there are lots of corn fields, I took notice that most/all of the corn I saw had obvious cobs - this is not the case in the mid-west or west as far as I understand it. The corn hasn't developed sexually in terms of accepting the pollen, very bad news.
BTW, the seed used out west is predominantly the Monsanto stuff which costs 10x then corn seed as little as 20 years ago. The farmers were sold on extreme drought resistence relative to the "original" corn seed thus the 10x factor, if the crops fail as expected Monsanto is likely to have some problems :) (My vote for most evil company in the world, at in the US - and that's saying something). Shorting Monsanto might be a good play over the next few months as crop yields are likely to fail even worse than expected - in some places total failure.
MONsanto is up today, a little over 1% but still well below the $90+ target put on it by analysts. I'm sure Monsanto is and will be fine regardless of what happens they'll continue to grow and prosper by killing all heirloom seeds and replacing with the Monsanto variety. Monsanto is currently in litigation with a northeastern state to force them to only allow the use Monsanto seeds - I'm not sure on the details other than what they are trying to do is criminal (and extremely dangerous).
Ask Monsanto what's happening to the Bees? They (apparently) would love nothing more then to have all Bees extreminated so they can effectively fill that role (where there is a profit). I believe they would sacrifice millions of species of plants and animals so they can control the markets in terms of seeds and food crops. Monsanto has caused more death and destruction (think Agent Orange, genetically modeified seeds, etc) then probably any 10 companies in the history of the world.
Only Monsanto (and probably the Gubmint) know the extent of their crimes against anything and everything that lives, as well as the planet (Biosphere) itself. Just another multi-national corporation that is raping and pillaging society at any cost, although one could argue this is worse than anything the financial services industry could do! Its our planet and our food supply they are fucking with, capitalism unabated leads to this - profits (and personal gain behind corporate annonymity) at all costs.
It is the Monsanto's of the world that will force, at some point, a complete rethinking of capitalism and the way it works (or doesn't) as well as the destructive relationship they have with Governments and politicians. Unfortunately this will only happen (if it ever does) after a major catrostophy that has no resolution - like a complete failure of the mid-western break-basket as the coil (sponge) can no longer sustain even the most modified genetics! The weather seems to be conspiring to bring this about even as many argue that it is this situation that will justify a complete transition to modified genetics! I'm hoping for a failure frankly, I'd rather not see our world become what would inevitably become a complete failure with lots and lots and lots of suffering!
Fucking Monsanto, that's my rant for the day!
Monsanto may be getting it's ass handed to it by Mother Nature:
Nature fights back - bugs devour GM Monsanto corn with a vengeance Learn more: http://www.naturalnews.com/036254_GM_corn_rootworm_crop_failures.html#ixzz20nxo43NOOh yes, mother nature is giving it to Monsanto, and the people who deny evolution are scratching their heads at the round up resistant weeds and incects popping up. Then again... ask your typical Non-gmo farmer how his corn is doing in this weather. 70 bu/acre> 0 bu/ acre
I've noticed around my location in IN that the crops that were planted earlier than normal(because of the earlier spring warmup) look a hell of a lot better than the crops that were planted during the normal planting times or later. The latter are toast.
There were some nice rains around some parts of the midwest this past week(last Thur-Fri-Sat) and some of the corn crops I saw around northern IL(Peoria and north) and SE IA looked very nice. Some of those could be irrigated though...
Corn is one of the largest gov. subsidized crops...if not the highest. These are for the most part not subsidies to farmers, but to outfits like Cargill, ADM, etc., etc.
The real bad news in corn products is HFCS. See here: http://grist.org/article/2010-03-25-corn-ethanol-meat-hfcs/
I agree w/ your assessment on corn east of the IL/Miss rivers and along the Ohio. but beans still have a fighting chance. Remind me again how middle men make a profit off of subsidies? As a margin business, the spare change still ends up in the pockets of farmers.
"the spare change still ends up in the pockets of farmers."
Most likely the corporate farmers, not the family farmers. Of couse the latter are a dying, mostly disappeared breed...
I'm not sure how many farmers you work with, but almost all farmers incorporate themselves to reduce taxes. The farms are still family owned and operated. I must admit I'm rather jealous of their ability to do that, but needless to say, the argument that family farms are a dying breed is crock.
A lot of family farmers began hitching themselves to corporate deals(contract farming) quite awhile back with the rationalization that it would provide a more steady income in order to service the massive debts they had saddled themselves with. IMO those who did are corporate farmers. In fact they might as well be modern day sharecroppers. A farmer loses a lot of the decision making abilities when they sign deals like that. If you later decide you made a mistake, those big corps can put you in a world of hurt through litigation and such.
Small family farms with farming as sole source of income have definitely declined to the point of being described as dying. 6.8 million family farms in 1935 to around two million today. And many of those two million are not farms that are sole source of income.
I won't even dignify the commie/Farm Aid comment with a response.
/s It's a great fucking idea to let Cargill/ADM/Monsanto and the like control just about everything regarding food production. /s I think we'll see soon how that's going to work out for all of us.
the small farmers are cashing out now at the height of the farmland bubble-don't feel sorry for them-leave that lefty/commie shit for FarmAid
no forecast rains in IL/IN in the next 2 weeks and beans are wiped out
free hemp
http://www.youtube.com/watch?v=y7BNp7rgnVQ