Current Marketing Thoughts
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Flat Price Corn: Where do We Find Traction?
Jan 21, 2014
Flat-Price Corn… It's All About "Demand" - The "supply" side of the story continues to keep the same bearish tone, "our ending stocks are more than double that of last year," and possibly moving even higher in the days and weeks ahead. Meaning, in my opinion, we are NOT going to get any type of of major supply side rally between now and planting season. Yes, you could argue a reduction in Argentine corn, but we won't know the final verdict on the Brazilian second-crop corn until Spring so South America remains somewhat in limbo. Net-net, the only real bullish horsepower will have to come from the "demand" side of the equation. The problem is, I am not so certain corn used for ethanol can push a whole lot higher, and with cattle and hog herd numbers less than impressive a major jump in fee usage seems out of the questions. That leaves us with "exports." Could we eventually push exports north of 1.7 billion? Sure, but I am thinking it would be on lower prices not higher prices. Could China step in and start to make purchases in an attempt to rebuild their domestic supply pipeline? Sure, but I suspect that happens on lower prices not higher prices. Bottom-line, in a bull market you either have a "supply" story or a "demand" story that fuels the fire. In the best of all worlds, like the past few... you had BOTH. You had a major "supply" story in the fact the worlds top corn producer (US) had horrific growing conditions. You also had a major "demand" story, in the fact, corn was becoming an energy source and ethanol was chewing through an extra 500 to 1 billion bushels of supply each year. Now all of a sudden the "supply" story is gone as the US bounces back by producing a NEW record corn crop and global ending stocks move to higher levels. Demand has to now become our driving force. In my opinion, with about half the horsepower, a lot less torque and not near the excitement of a "supply" side story, "demand" will have a very tough time getting much traction or find the power to push us back up the hill. Click here for my daily report...