I just read Darin Newsom's very good article about Grain Stocks.. He pointed out that the June 30th USDA corn stocks report was at 4.31 bil bu the fourth highest on record.. while also implying a very high useage rate..(???) He goes on to say that the Sept 1 stocks report could come in all over the map.. USDA currently has 1.386 bb penciled in.. but depending upon how you look at it.. (especially with the early harvest.. we finished our dryland in August..something that isn't unusual..) He makes a point that if demand falls off to a more average level.. (due to the rally in prices..???) we could see stocks come in higher than currently expected... (hmmm..??) He goes on to talk about the Market Carry found in the spreads which he views as an indication of the markets bullishness/bearishness... (read the article for his interpretation.) I'm probably in the camp that expects USDA to find a larger stocks number than their 1.386 number..(although I could be wrong..??) looking out my window (which the world is bigger than that..I know.. but still..) and the large local carry over from last year. Here the local coop carried over almost 25% of the 09 crop in open storage. (I kid you not..) The market has talked about blending some of last year's junky corn off etc... it has been mentioned from time to time in market commentary about barges full of junky 09 corn awaiting new crop to blend off. Although here the quality of carry-over stocks was pretty good.. once we got it picked up off the ground. We just had a bumper 09 crop.. the 10 yields may end up down a little..?? but probably not as much as found in Ill... some are better than last year. (Kansas is projected to harvest about 800 mln bushels of feed grains.. 620 corn.. 180 sorghum.. probably an 18 month supply for our demand base. On top of 145 Soy and ??? 400'ish on the wheaties.. I believe we only have something like 1,200 storage..) It probably will just depend upon how scared USDA gets over the smaller 2010 yields... If they hit the panic button and allow the funds to continue to "feast on Bear" then we probably will go alot higher.. If USDA considers the damage that higher prices will cause.. (but necessary to reign in demand/promote production..???) then they may moderate their numbers/views.. ??? I honestly don't know what to expect..?? They threw a bearish curve ball in the January report.. but it appears to have been the right call. If they let the markets run.. then you end up with end users like VeraSun going out of business.. and people losing their jobs... something no one really likes to see. USDA has always done a good job of staying unpredictable.. so lol.. nothing would surprise me. If on the other hand we really are facing a depleted inventory then people get nervous about food security.. hard for me to see when we are stuffing everything we can think of full of grain... There are bunkers full of wheat.. corn.. etc.. even tried to ship wheat into unused Aircraft plants.. most of the storage here is stuffed full and piling on the ground.. already.. but it is a big demand base we are feeding. There's a lot of slack in this market.. for instance.. what is the DDG inventory? We're crunching through 4.5 bb of grain for ethanol... at 17 lbs that's 1.367 bb of DDG equivalent bushels... what's happening to that inventory year on year.. is it building? What if we've got a 20% build in DDG inventory ?? (just a wild guess.. no clue what the actual number is...) that would be 273 mln bushels sitting in a warehouse somewhere....???? It would be hard to imagine a decline given the growth in ethanol production.. but I guess that would be a possibility.. one I wouldn't expect. As prices move.. useage rates are going to change.. Extension here is preaching to feeders to utilize the WDG's and roughages to strecth expensive grain inventories.. so that's one garden hose on the bullish fire.. will it matter... I don't know???? With the Fed talking about QE2.. well.. probably going to need a lot of garden hoses... (btw..is the Fed nuts??) So.. the next couple of months are going to be interesting.. just when I was starting to believe I'd "seen it all." lol.
Edited by JonSCKs 9/26/2010 10:24
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Grain stocks article..
