JonSCKs - 2/21/2024 04:36

These are good points.. and part of the reasons why coming off the highs from the 2012 drought.. CBOT Corn touched $3.98 on 1/31/2014.. then reversed and hit $5.21 on 4/30/2014.. see pics below.. Soybeans.. $11.53 on 8/31/2013 to $15.30 by April of 2014.. see pics below.

The Funds are record short.. as you point out in your audio.. some producers have made mistakes like locking in basis contracts which will get rolled to a wider basis..  

WHY would you do this?  

You should typically set a basis contract at the lower range of futures prices.. not the top?  Sure $5 corn could go to $6.. but it could also go to $4.. so WHY lock in the basis.. just the normal tightening of sales will drive it.. no need to lock it in during the flush of fall sales..?!?

Essentially the buyer has laid a trap for the seller.. with the short funds driving the herd of Buffalo.. (basis contracted sales) over the cliff.

Dr Cordonier on Agri Talk today noted that the ABCDs run the risk of South American producers defaulting on their contracts.. even though the grain companies have profitable positions.. if enough producers default.. even though in this country the grain sellers in a contract could get sued.. do the ABCDs have enough $$$ to absorb the BILLIONS in losses to stay in business to prevail in courts to eventually bankrupt the producers to deliver.. he said that the Brazilian government would probably offer loans.. so the producers could renegotiate terms..  it’s what he said.. go listen.

The same thing can.. although it’s rare.. happen here in the US.

I’m not fully understanding the post below about the Andersons bringing Ukrainian wheat into the US gulf.. at a loss.. in order to profit from its large short futures position.. allegedly.. because if they actually did that.. it’s illegal and called “price fixing” and if we had a Justice department with a backbone.. the Andersons should be sued into bankruptcy.

… and maybe they will?  

That’s not very wise.. maybe that’s why they went BK on the ethanol plant at Colwich?  

Anyway.. color me “not impressed” with the Andersons.

If that’s what the poster was alleging.. it’s not clear to me what he was saying.

China has bought wheat.. US soft.. from the Andersons?  Who has sold it?  But can’t originate it from the farmer now that prices have broke??

the post isn’t clear.. so???  Idk.  Anyway..

The market is chattering about “undersold” bushels when in reality this is a minor detail.. The carryout in Corn is “only” projected to be 2.4 ish billion out of 15 billion or.. about 15.. 16% of the crop.. most years we could carry over 20% of the crop in open storage.. in fact some producers on average.. could carry that for several years.

An impressive.. above average.. but not really large estate had over $5 million of grain.. in the elevator.. paying storage.  

“Welp.. gotta have something available for when the neighbors farm comes up for sale.”

Most country elevators have more than one to numerous customers who can do this.. across the whole country.. there’s gonna be way more than whatever the US carryout is projected to be.  Or we wouldn’t have land prices doing what they’ve done.. or.. did.  (Has land topped btw?  That’s another discussion I reckon..)

On the other hand are the short funds.. who must mark to market.. daily.. their positions.  Right now with record shorts.. they must drive sales in excess of daily usage in order to cover.

Say US usage is.. 15 billion / 52 weeks or.. 288 myn bushels on average per week.  Give or take.. and the funds have shorted.. not gonna look it up but like.. 280,000 contracts or.. 1.4 billion bushels..

We know the average pace of farmer sales as reported each year by USDA as they figure the ARC payments.. see pic below.  On average 56% of the US corn crop is already sold by now.. with another 6.9% sold in February taking it to 62.9% which means.. only 37.1%.. if that.. given that 20% can store for multiple years.. so in reality.. only.. flip it say 20% will come and 17.1% doesn’t have to sell.. this year.  (Lol there are guys sitting on 2021 corn.. welp maybe we’ll see $8 corn again..). 

And the reality is.. we could.. because.. with 55 myn of exports.. 110 of ethanol.. and 123 of feed plus other = the 288 myn bushels of average.. however with 6 months.. or 26 weeks left to by 20% of the crop.. or 15 x 20% = 3 billion / 26 weeks = 115 myn.. that won’t even cover usage.. so where is the excess sales going to occur to allow the short funds to cover?

South America?

it’s a global market.. and no doubt they are counting on that.. but with actual yield reports continuing to underwhelm.. the Brazilian Soybean crop will probably come in.. most reports are around 145.. 147.. mmts.. which is less then last year.. the Safrina corn crop.. if it’s not planted by now.. runs the risk of the monsoon season ending before maturity.. with low prices.. around $3 in the hinterlands.. with default risks rising.. and large trucking costs to get it to ports.. below the costs of production.. what if all that.. just.. stops?

and this whole setup could explode.. especially if the forecast changes.. Is this 2016s weather.. or 1988.. or 1981s?

hmmm.

Its gonna be an interesting ride.

USDA will probably have to raise US corn exports as we are running 30% over last years pace.. while cutting South Americas large.. but.. lower than last years crop.