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Corn Demand Shows No Slowdown

April 2, 2011

 

The continued decline of the U.S. corn supply was confirmed in Thursday’s Grain Stocks Report from USDA. That short supply is now turning into a potentially dangerous situation, says Jerry Gulke, president of the Gulke Group.
 
"The stocks report was very surprising. With higher prices, you would think we would use less, instead we used more. In fact, a lot more than we did last year at this time."
The trouble with figuring USDA’s number from this week is the fact that it does not designate where that information comes from. The next WASDE (World Agriculture Supply & Demand) Report will be released on April 8 and that will give a better indication where the demand is. If that report shows continued expectations for high usage, it then becomes a question of how high prices can go.
 
"If this demand continues like it has for the next two quarters. If it does, anything the government suggests as carryover, which will be less than it was in the March report, somebody will extrapolate that out and say you can get below 500 million bushels. We need to go high enough that somebody stops using it or everybody cuts back a little bit. Or we could really have a problem in June, July and August, when we may run out of corn."
 
The question for now is where demand will be curbed. Gulke says there are two ways to look at that. First, is ethanol plants could start selling their corn inventory because it has better returns than producing ethanol. The same holds true on the livestock side where you could see producers begin selling their livestock and selling the corn. That’s a worst-case scenario.
 
"It gets complicated, but the market focuses on the fact that there’s much to do when farmers make their intentions. They’ll says the market didn’t entice farmers to plant enough corn. Maybe they can’t buy enough acres and they’ll have to shrink demand."
 
Some buyers are beginning to offer incentive to farmers to deliver corn by September 1st . Anecdotal evidence on the both coasts, Gulke says, are showing that buyers are offering premiums to farmers who will deliver by September 1st.
 
If this is the case, farmers need to realize that this won’t account for the entire crop. In situations like this, corn users are trying to get enough corn on hand to get through a week or two until the majority of the new crop corn is fully available to the market.
 
The impact of the report will live for some time, Gulke says. Weather will be the next factor to fully influence the market. Freezing forecasts for some winter wheat early next week is the next source of concern.
 
In the meantime, rumors freezes, accelerated planting, delayed planting and shifts in acreage will continue to feed volatility concerns.
 
The reports were mostly bullish for soybeans, as well. Friday’s market turned south when China cancelled shipments of soybeans and soybean products.  

 

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COMMENTS (7 Comments)

gardengal - Elgin, NE
Hi Jerry...remember me? I am still around...79 now. Anyway I think what NFO and Am. Ag. predicted 15 to 20 yrs. ago is coming true. We must have a reserve in order and we must have parity. We grain farmers have waited 40 yrs. to have a good profit. Sadly the fertilizer, herbicide and fuel companies want their profits to go sky high and there goies parity. You can send this to your friend in Wyoming.​
12:22 PM Apr 4th
 
PullMyFinger - Chappell, NE
The price of everything is stupidly high. Why should grain be the only exception? Grain prices stayed at 18th century levels far, far too long and now it's finally time to pay the piper. All grains are still selling far below the parity price, by the way.
10:40 AM Apr 3rd
 
NAGEL
WITH PRICES REALLY STARTING TO GO HIGHER, WILL IT REALLY BE NECESSARY TO INCREASE YIELDS TO MAXIMIZE PROFITS. IN OTHER WORDS CUT SOME HIGH PRICED INPUT COSTS, LOWER PRODUCTION EQUALS HIGHER PRICES AND INCREASED PROFITS. IS THE MARKET REALLY BUYING CORN ACRES OR JUST BUYING HIGH PRICED CORN. HIGH PRICES WILL RATION DEMAND, BUT HIGH PRICES MAY ALSO RATION PRODUCTION AS SOME MAY REALIZE MORE PROFITS BY LOWERING INPUT COSTS AND BEING MORE EFFICIENT.
2:14 AM Apr 3rd
 
NAGEL
WITH PRICES REALLY STARTING TO GO HIGHER, WILL IT REALLY BE NECESSARY TO INCREASE YIELDS TO MAXIMIZE PROFITS. IN OTHER WORDS CUT SOME HIGH PRICED INPUT COSTS, LOWER PRODUCTION EQUALS HIGHER PRICES AND INCREASED PROFITS. IS THE MARKET REALLY BUYING CORN ACRES OR JUST BUYING HIGH PRICED CORN. HIGH PRICES WILL RATION DEMAND, BUT HIGH PRICES MAY ALSO RATION PRODUCTION AS SOME MAY REALIZE MORE PROFITS BY LOWERING INPUT COSTS AND BEING MORE EFFICIENT.
2:14 AM Apr 3rd
 
Quillnomen
Has anyone looked at how much of the corn is being used by aqua culture in China and other Asian countries that we, USA, then buys back as cheap shrimp and other fish products?

I do not have boots in Asia to look at this, but as shrimp and other fish have come down in price and more is imported we seem to export more corn. Are we killing our own aqua culture here especially catfish because of it.

On a local level at the grocery store, it is now cheaper to buy crab legs than mid-priced steak cuts. Salmon is a buck cheaper. As a person who raises beef and lamb, we need to watch this.
12:13 PM Apr 2nd
 
Quillnomen
Has anyone looked at how much of the corn is being used by aqua culture in China and other Asian countries that we, USA, then buys back as cheap shrimp and other fish products?

I do not have boots in Asia to look at this, but as shrimp and other fish have come down in price and more is imported we seem to export more corn. Are we killing our own aqua culture here especially catfish because of it.

On a local level at the grocery store, it is now cheaper to buy crab legs than mid-priced steak cuts. Salmon is a buck cheaper. As a person who raises beef and lamb, we need to watch this.
12:13 PM Apr 2nd
 
detailsnerd - Archie, MO
Wow, I hope those grammar mistakes are just typos. Who's in charge of editing this stuff anyway?? ​
7:39 AM Apr 2nd
 



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