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What Every Farmer And Commodity Trader Will Be Glued To Tomorrow at 830ET
With drought conditions bad and getting worse and agricultural commodities 'stabilizing' at their multi-year highs, tomorrow morning could be the catalyst for the next leg in a global food inflation spike (and its accompanying deflationary impacts on economies). The USDA releases it August World Agricultural Supply and Demand Estimates (WASDE) at 830ET - which is particularly important since it is the first survey-based estimates of the year. It would appear that while pre-positioning has slowed a little, sell-side analysts expect prices (and implied vols) for corn, soybeans, and less-so wheat to rise on the back of not just (dramatically) lower crop yields (in this first of the year survey) but overly optimistic harvested-to-planted estimates and demand limits. Ethanol demand destruction is also emerging as a consensus.
Goldman On WASDE Expectations:
We expect higher corn prices and soybean price outperformance
We forecast a US corn yield of 126 bu/ac and US corn production of 10,750 million bushels. As a result, we believe that ethanol demand destruction is necessary and our corn price forecast is based on the price of corn that pushes the cost of producing ethanol above the price of RBOB gasoline blendstock. Given our forecast for higher oil prices, this puts our 3-mo CBOT corn price forecast at $9.00/bu.
August weather is key to US soybean yields and recent rains will be beneficial to US soybean production. As we had intentionally left our US yield forecast at a high level of 39.5 bu/ac to allow for such an outcome, our US soybean outlook is unchanged. We expect that 2012/13 US soybean ending stocks will be at critically low levels: with the large shortfall in 2011/12 South American production, the global availability of soybeans will be limited until the next South American harvest, with the US the only supplier until then. As a result, we believe that higher new crop soybean prices will be required to limit demand in the coming months and our 3-mo forecast is $20.00/bu.
We forecast lower global wheat production and lower export surpluses given continued hot and dry weather conditions in key producing regions. However, global wheat inventories remain larger than corn stocks and we forecast that wheat feeding will be required to supplement corn and DDG use in the US and globally. As a result, we continue to forecast that US wheat prices will need to trade back near corn prices by next spring. A further deterioration in weather conditions, potential FSU export restrictions and pent-up import demand create risks that global wheat inventories decline even more than we expect and push wheat prices well above corn prices.
Hedging recommendations
Consumers: We forecast higher corn, soybean and wheat prices over the next 3 months given the severity of the current US drought, with our 6-mo price forecast also above the current forward curve. As a result, we recommend consumers lock in current prices as well as layer in upside calls to hedge against the higher prices that we forecast, especially for corn and soybeans. Although up since early July, implied volatility levels remain well below their previous peaks and still represent value especially if weather conditions deteriorate further.
Producers: Following the recent rally in corn, soybean and wheat prices, we recommend Southern Hemisphere producers lock in producing margins.
Morgan Stanley On WASDE Expectations:
We expect a bullish report for the grains with further downside likely for US corn and soybean yields, and shaky global wheat supplies.
Bullish corn, with entire 12/13 balance sheet in play. Armed with its first survey-based yield estimates of the year, the USDA is likely to reduce (dramatically) yield and production estimates for a second consecutive month. While we expect corn yields could easily come in below 130 bu/acre (our weather-driven models show 127 bu/acre), this will not in and of itself be bullish, with consensus already positioned below that level. Instead, we will be watch how the USDA handles the harvested to planted (H/P) ratio, currently at an above-average 92.2% (vs our recently-lowered 88.7%). Over the past 25 years, the 3 seasons with the worst yield disappointments saw H/P ratios fall at least 3% below average. With news already emerging of farmers cutting corn for silage a month earlier than usual and abandoning fields, we’ll be surprised if the USDA does not cut its optimistic H/P estimate.
To balance a production decline of up to 2 bln bu, the USDA will have to make large cuts to all line items. Ethanol demand will be the hardest line item to ration, in our view; accordingly we expect only a 200-300 mln bu reduction to the USDA’s current estimate of 4.9 bln bu. However, feed and export demand could each see cuts as large as 500-800 mln bu. Providing some offset, the USDA will likely lower 11/12 ethanol and export demand (by 50 and 100 mln bu, respectively) with the latest high-frequency data disappointing. Globally, we see little good news, with as much as 1 mln MT and 2.5 mln MT of downside to Russian and Ukrainian production estimates, respectively, as drought hammers those countries. We see upside to Brazilian 11/12 and 12/13 exports on the need to offset lost US supply, while China may well prove the one bright spot for global production, with as much as 2-3 mln MT of downside possible for 12/13 imports on stronger domestic supply.
Soybean production is likely to fare better than corn, though we still see the need for more demand rationing. With old-crop demand still running inline with last month’s expectations, we expect no changes to the 11/12 balance on Friday, leaving all of the focus on the 12/13 crop. The market has long understood that the soybean crop is more resilient than corn (and recent rains should shore up confidence that conditions can still stabilize). However, with the US soybean crop rated in the worst condition since 1988 (when soybean yields fell 20% YoY to just 27 bu/acre), we see the USDA’s current yield estimate of 40.5 as too high (our models show 38 bu/acre). As with corn, stories of failed soybean fields will likely increase the pressure to reduce the USDA’s elevated h/p ratio — currently pegged at 98.9%, vs our estimate of 98.2%. To offset weakness in US production, we see downside of as much as 200 mln bu to the USD’s 12/13 export forecast, balanced by a combination of higher exports from Brazil and a 1.5 mln MT reduction to Chinese 12/13 soybean imports. We see limited downside to US 12/13 crush, on the need to keep US soy meal and oil stocks above record-tight levels.
Expecting a bullish report for wheat, on faltering international production. Falling production in Russia and China — seen lower by 4 mln MT and 10 mln MT, respectively, from the USDA’s official estimates in the most recent Attaché dispatches — is likely to further support US wheat export demand. We would not be surprised to ultimately see US 12/13 exports lifted by 25 mln bu. However, the slow pace of US export sales MYTD, may keep the USDA on the sidelines this month. While we have raised our 12/13 all wheat yield estimate to nearly flat with the USDA, we continue to view its higher than average h/p ratio assumption of 87% as overdone, particularly given the decelerating pace of the winter wheat harvest.
Citi On WASDE Expectations
Given that large regions of the Midwest are now categorized as being in “Extreme” or “Exceptional” drought, we expect the USDA to significantly lower their July yield estimates of 146 bu/acre and 40.5 bu/acre for corn and soybeans, respectively. Citi’s commodity futures strategist currently estimates yields of 133 and 38, respectively, while on their 2Q conference call, AGU management indicated that they believe corn yields may be in the 120s. As a comparison, following the severest drought in recent history (1988), nationwide yields were ~25% below the trend yield at that time. A similar decline from the current trend would point to a corn yield in the low 120 bu/acre range. At this yield corn demand destruction is necessary, with ethanol and feed usage at risk.
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Where the hell is Beaks?!
They switched the reports! Get your ass back in there and "SELL SELL SELL!!!!"
Turn those machines back on!!!!
Randolph Duke: Mother always said you were greedy.
Mortimer Duke: She meant it as a compliment.
http://www.imdb.com/character/ch0012275/quotes
Agreed, forget about corn prices. It's frozen concentrated orange juice we need to worry about.
Where's my limo where's my ho's ...awesome comment dude
One minute you're up half a million in soybeans and the next - boom! Your kids don't go to college and they've repossessed your Bentley. Are you with me?
We're getting some of the blow off characteristics of another nasty bear market.
When the central banks punch the gas, prices will soar.
I just returned from Iowa and western Illinois ,, Corn is TOAST ... and although the soybeans look healthy the plants HAVE NO BEANS...
I just returned from Iowa and western Illinois ,, Corn is TOAST ... and although the soybeans look healthy the plants HAVE NO BEANS...
It's GS, fade it?
Where the flock is Stolper when you need him.
I think, as mentioned around here recently, that the drought is really nice cover for money printing. When the food price shock really hits hard, they point at the weather. Meanwhile the financial thuggery goes into high gear.
What a nightmare.
wtf?
Yeah, let's double food inflation!
Dried powdered dirt sandwiches for all the sheeple, then after lunch, dirt naps for everyone else going into dinner! How does that sound children? YEAH!!!
Mars- did we ever battle in unreal t?
M.A.R.S. = http://www.naderlibrary.com/IWouldTell45_small.gif
Unreal t?
Negative. Maybe some twisted fucker stole my name.
Don't forget bioethanol in gasoline is now mandated at 10% for many states, another good intention that will now bite everyone in the ass.
I could not find the crop report released early anywhere on the USDA website, but I did find next months labor report.
Word has it, it will be released 15 hours late.
Just in time for the weekend.
Did you happen to catch the NFP for Oct?
I say the trade is frothy. Sell on the news.
Or did Oblahblah see the report and it's ugly and so out of frustration lashed out at crude speculators because the fed can't print and if Rut2k tanks so does his re-election chances?
Thats ok the plunge team will just nuke someone's algo
feast or famine banksta gonna bank.
Corn is the new Gold.
Nothing Monsanto makes will ever be equal to Gold
Maybe not. They were successful in getting Triple Strike (weed killer) banned.
or food.
"Corn is the new Gold."
Jim Rogers said pretty much the same thing he's been preaching about buying farmable land for a while now even before the food riots. When you think about it with how large the world's population is in a sense Corn will be like Gold it's used in a lot of things.
$10 Corn Is Coming, Top Fund Manager SaysI just sold a farm...small 90 acres..but in Iowa...good farm land.....for $12,000 and acre....now folks....that is frothy....its all into gold now....lol
Somebody check the BLS website...maybe they're already posted. /sarc
With only 2/3 the energy of gasoline, ethanol costs more per mile The energy of ethanol relative to gasolineA. 76,000 = BTU of energy in a gallon of ethanol
B. 116,090 = BTU of energy in a gallon of gasoline
C. .655 = 2/3 = GGE of energy in a gallon of ethanol. A / B. (GGE =energy in a gal. of gas)
D. 1.53 = Gallons of ethanol with the energy of 1 gallon of gasoline. D = B / A.
The basic story on ethanol mileage and cost
Some Ethanol proponents claim it doesn't hurt their mileage, but this goes against physics, and you will not find the ethanol lobby making such fraudulent claims--they could be sued. But just to be sure, zFacts analyzed all of EPA's ethanol mileage tests for one year and, big surprise, ethanol gave exactly 2/3 the mileage of gasoline. Now there is one possible loophole and it is used by a Swedish sports car, the SABA 9-5 Bio-power. Here's the trick. Higher compression ratios make engines more efficient, and because of its high octane, ethanol can take a higher compression ratio. The Bio-power is turbo charged and when it uses E85 it switches to a higher compression ratio. It still gets fewer mpg on ethanol, but it does a little better. Unfortunately it's very expensive. An easier approach is to use diesel, which also gives you a high compression ratio and mileage as good as a hybrid at less cost. That's why all big trucks are diesel. The USDA tells us that ethanol cost 57¢ more per gallon on average over the last 25 years (and it still does). Put that together with the fact that it takes 1.53 gallons to equal a gallon of gasoline.Nice try, but you can't baffle me with facts.
- your local Lib
Bullshit. Ethanol is totally a red state corparate welfare scam. Own your own slimeballs dude.
Everyone knows ethanol is inferior to gasoline in every way. We are using corn based ethanol because we can produce corn in, "abundance". Abundance is one othe most important factors in determining the commercial viability of an energy source. What everyone does not know is that...
What everyone does not know is that...
Population growth, if it continued long enough, would also lead to unavoidable scarcity. exponential growth in human population has the capacity to overwhelm any finite supply of resources, even the entire known universe, in a remarkably short time. For example, if the human population continued to grow indefinitely at its 1994 rate, in 1,900 years the mass of the human population would equal the mass of Earth, and in 6000 years the mass of the human population would equal the estimated mass of the observable universe[10] Although this would imply the invention of faster than light travel, necessary for humanity to spread throughout the universe as fast as population growth, even at lower growth rates these levels would still be reached in readily imaginable times. So a plausible post-scarcity scenario must imply zero population growth or relatively low population growth.
Hows that abundance working out for ya ?
Somebody in the 1970's already thought of that - they decided to build a huge stone henge monument and called it the Georgia Guidestones. Capping the earth's population at 500,000,000.
If we could harness the power of Lib stupidity, we'd have 500 mpg.
Talk about abundance!
Lib stupidity? You mean liberal or libertarian? not that it matters
"Talk about abundance!"
Interesting time in history that we are living in. If you were a spark and had a choice what time in history to be born human this would definitely be a strange choice.
A point in time where the Earth is providing an abundance so immense that you would think that just being born in this period in time would be a shoe in for a happy life.
I agree that being born now is special. Can you imagine that all the people that came before us could not watch free porn on the internet? What a harsh existence!
A point in time where chemicals and petroleum based energy products are providing an abundance so immense that you would think that just being born in this period in time would be a shoe in for a happy life.
fixed...
Shut off the fertilizers, nitrogens, anhydrous ammonias, the diesel fuel used to till, plant and harvest the huge acreage in corporate farming, gmos, etc., and see what happens to that abundance. Yes the chemical/petroleum based abundance works great, until it doesn't. What's the shelf life of it...until your soil is ruined?
All true, but ethanol is greener so makes you feel better even if you do spend a bit more
Um, or not.
98 TDI Diesel getting 49 mpg's bitchezz! oh plus I can always top off with heating oil left abandon in the homes of Fema camp refugees.
The MPG was much higher until they put all that "clean diesel" technology on the TDI. Still looking for another older one.
i know when i've got high octane corn syrup under foot it's PEDAL TO THE METAL BOYZ!
Officialdom calls ethanol and 'additive', but it is actually an adulterant.
I am going long the Jolly Green Giant.
long farmland with water rights bitchez..
Have you read the Federal waterways act yet? They can seize a water puddle in your driveway now.
I piss in my driveway...so they can have the puddle. In fact, I'll rub their fucking nose in it.
What about the recent price run in muggets?
STFU. These dudes will be all over that ETF.
How does riseing food prices had a deflationary effect?
Thanks in advance
As food goes up, I-pads go down. Got it?
http://www.youtube.com/watch?v=lAl28d6tbko
It's that substitution thingy.
More family income spent on food (considered 'non-discretionary spending') means less income available for other ('discretionary') stuff, means less retail sales of clothes, toys (kids and adults), tools, housewares, etc = less orders to manufactureres = fewer jobs = deflation.
I will avoid purchasing or outright sell what I can part with to purchase what I must have.
Must have: Food, water, energy
Can part with: Everything else
I think there is more stuff in the "can part with" category, so overall deflation in the face of rising "must have" stuff. Until the "can part" with category has been decimated to the point that "must have" is in the majority, then it's inflation.
The way to win the WWIII is to control food and oil, and slowly bring the water to boil. Don't forget to stir it occasionally. The target is no other than Beijing.
Obama signed an EO to seize all Retirement accounts. Search that. Then read this and heed the advise.
http://westernrifleshooters.wordpress.com/2012/08/07/barnhardt-more-on-401k-accounts-and-your-future/
Not yet. He will do it if reelected.
Many of those accounts, particularly newer ones, cannot be touched without some serious circumstances that are still subject to bank approval. This process started quite some time ago. Don't believe me? Call your plan provider and ask. You might not like what you hear. Me? Yeah, I have some "untouchable" money out there I know is toast. But at least I was able to change my contribution to ZERO and decide for myself what to do with my cash in the short term.
What do you call what just happened to Delphi employee's? The Treasury Dept killed and stole their Pensions to pay for "debt's" non descript. Go search it.
It is of higher quality.
Next: Edible fiat
Ah geez, trust you to bring up visions of Rosie O!
Crud, missed the 'i'.
So, what have we learned? (Hint: "Reading is FUNdamental!")
And what about the the price chart breakout in muggets today?
http://www.youtube.com/watch?v=1Cq7hf4ylvY&feature=player_detailpage "powered by ethanol no doubt."
The algos will be ready in full force to .... ahem... provide liquidity.... AHHH..HAHAHAHAHA!!!!!!
Seriously though, if the Squid says buy, its a sell. Vol was a good buy today though.
Luckily, the farmers have some of their hedged money tucked away safely with MFG and PFG.
My worst food inflation of the last week was seeing a 12 pack of Becks marked at 22 bills at a local ShopRite. I think there is a growing beer cartel starting with InBev because of their Budweiser purchase two years ago. I traded (down, up, sideways) for whiskey as liquor is quicker.. and now cheaper.
Sometime in the late 90s the beer price started getting out of hand. It has definitely gotten even worse in the last 5 years.
I remember buying cases of Molsen Golden for $12 back in the 80s. Or a 30-can suitcase of Old Milwaukee for $7. Or when I was really broke, a 32oz Haffenreffer for something like 68 cents.
Molsen was top shelf back then. lol. Up north it was Old Milwakuee, or down in the south it was Busch. Both pretty cheap for a case. Still not that expensive really. Seems to me the hard stuff is really cheap now... more than ever. Sign of the times? Rat race going full throttle now bound to have some consequences. Have a feeling the next generation of kids is going to show us what "fucked up" really means.
Heidelberg went for $4.50 a case back in my days. Frigging Coors was a luxury, available only thru someone going to Reno.
3 hours pay back then.
my dad made $9.13 and hour working at pabst in the 70's ... employee beer was $4.00 per case, and every second week he would go get 10 cases, and I would get 10 cases... Gave some of them away for favors...
Wow, that's like $25/hr today. Good pay for factory work.
Yeah I think I was at that party..
You were the guy drinking a beer, right?
Substitute to Yeunling or Keystone. Why support a foreign corp?
(May have misspelled Yuenling. I only drink it. A lot.)
My name? KEITH STONE!!!
The best laugh will be watching the TV alarmist claiming the corn storage is driving up gasoline prices
FYI: The best plant for making ethanol is sugar beet, sugar cane, and switchgrass. EPA: Let's use a food group so we can create a new food shortage instead.
If the endgame is an additive....there are better alternatives...and its not corn......Brazil can make it much cheaper than we can with sugar cane...more sugar per pound of pulp...but here in the USA...farmers grow corn..farmers vote....see how it works.....throw economics out the window...in comes politics to ruin the economy...yes that is how America works..or doesn´t
Only idiots would burn their food for fuel.
Everytime I go to the grocery store I feel like I need to get my eyes checked with the price increase week after week. If these skyrocketing prices continue, I'm going to end up blind.
https://miningstockvaluator.com/
Just think how bad this problem would be if Americans ate vegetables. The only beings in the US that eat vegetables are the cows and then we eat the cows.
Geoengineering.
That is whats fucking up the weather sytems.
HAARP.
"Weather: The Force Multiplier"
Own the Weather 2025...
U.S.A. Military/Air force.
Learn whats going on brothers and sisters.
They are evil fuckers out there.
Sorry... there is a much simpler solution to what is fucking up the weather... Hint: you get it from burning coal...
Thank goodness. Both of the above suggestions are things we can change.
I was under the mistaken impression that weather changes on Earth had something to do with the Giant Fucking Furnace that we orbit around.
Earl Butz. He thought it was corn they were growing.
How did commodities do in the last Depression? chirp...
We had the ability to produce/extract far more that we could consume back then...
Same as it is today.
you well know that in a deflation everything sinks relatively but I'll take a stack of jingly shiny things over paper promises from criminals any day. As it is, if it's a managed currency and gold is held artificially low I'll trade it for yuan and convert the yuan to dollars. Or rupees, or whatever else. Or maybe for land in Paraguay? Who cares as long as I don't have to trade it for bread.
And ya know, that whole "trade it for bread" thing? Yeah. Let's hope not, or the paper people are shredded.
has anybody checked to see if a "glitch" has posted these numbers yet? I want to get orders in before I go to bed and I am friggin tired.
Hunger riots. Ooooooo. They're the worst kind. And with everyone's food money being horded in the Hamptons I forsee some prime real estate opportunities developing.
I'd be bringing my soybeans to Mkt, but Corn is going higher.
Which crop is the most drought resistant? cause they are all going to plant that next year.
Wheat
This one is an outlier year for sure. I am Europe at the moment where I see the corn, wheat and sunflower crops completely destroyed by the drought and heatwave in several countries. I travelled here from SE Asia where the floods have destroyed all their crops of rice.
Time to go on a diet, people!
How after these corn price increase is e85 3.49 a gallon while oil is 4.29 a gallon? Can somebody explain it?