Joe Victor is a Business Development Specialist with Minneapolis Grain Exchange, Inc., where he monitors cash grain activity and cash grain opportunities. He provides marketing advice through this blog.
A Major Surprise
Oct 04, 2010
The Minneapolis Grain Exchange takes a hard look at the day supply or "cushion" which various national and international commodities have. Upon exploring the "starches" consisting of corn, rice and wheat we find a major surprise in the making. The surprise is within the corn as the days supply is at record level lows dating back to the 1999/00 marketing year. Presently the corn cushion is approximately one month (30 days) taking out the previous record of 2003/04’s 34 day supply. Both the producer and end user needs to be aware of the tightness in corn supply and at the same time keep an ear pinned to the EPA floor. EPA is expected to make a mid-October announcement on whether to increase the national blend rate of ethanol into gasoline from 10% to as high as 15%.
It is refreshing to see the wheat supply come down from the previous year of 146 days to 135 days as the present trend is tightening but well away from the tightness of the 48 days of the 2007/08 marketing year. The present 135 days supply of wheat represents just less than 5 months or 37% of one full year. Make certain you are aware of the potential fall and spring wheat seedings for the 2011 harvest. The present status of wheat supply looks eerily similar to the 1999/00 into the 2000/01 marketing year and the international days supply tells a completely different story. Look at the present futures spreads to see if it pays to store on your farm or within the country elevator sectors.
If there is a thorn in the USA days supply of starches it rest with the rice market. For four consecutive years we have experienced the days supply growing for rice to a present level of 97 days a record unto itself vs last years previous record of 85 days vs the previous record of 67 days within the 2005/06 level. However it is refreshing to see how the Nov futures maintain trend line support since late July of 2010.
In conclusion be aware of the tightness in the corn supply and restricting in wheat as well as growth within rice. You also need to be cognizant of the intentional field of play when referencing starches.
We welcome your questions.........Joe Victor
MGEX welcomes any questions you may have by calling 612-321-7164 or