Corn, soy futures soar
on lower stocks report
Minn. — The pressure is on U.S. corn from livestock
producers trying to decide when feed will be affordable
enough to expand their herds, and ethanol processors
keeping one eye on yields and the other on the U.S.
Environmental Protection Agency (EPA) for a decision
on raising the national minimum ethanol-gasoline ratio
from E10 to E15 or even E12.
of Trade (CBOT) corn futures across the board ended
limit-up Friday and were still climbing Monday morning
at press time, on the USDA’s dropping its estimate of
this season’s harvest to 12.66 billion bushels – nearly
half a billion bushels, or almost 4 percent, from its
1 figure of 13.16 billion bushels was itself down 2
percent from the Aug. 1 estimate, but that decrease
was only around 205 million bushels and still projected
to be a record U.S. corn harvest.
“Which just goes to show you (the USDA) didn’t have
a handle on things in August and September,” said Peter
Georgantones with Investment Trading Services in Minneapolis.
“I’m still shocked they knocked six bushels an acre
off the yield (from 162.5 to 155.8).”
2010-11 U.S. ending stocks for corn were also down from
the September estimate, from 1.12 billion bushels to
902 million this month, or 19 percent. Georgantones
has “no doubt” about corn going to $6.
at the point now where ethanol and feed use is about
the same,” he said, referring to Friday’s USDA estimate
of corn use in 2010-11; feed use is projected at 5.4
billion bushels and ethanol, at 4.7 billion.
the USDA dropped projected corn exports by 100 million
bushels this month on tighter stocks (and likely resultant
higher prices), and the potential of increased competition
from Argentina, which is now planting.
Shawn Hackett of Hackett Financial Advisors, Inc. added
the USDA report has come out early enough to allow South
American farmers to increase their planted acreage if
they wish, to meet world demand.
speculates the EPA will hold off on a decision about
increasing the blend wall for ethanol for now. If it
announced an increase, EPA would run the risk of sending
corn futures even higher, he explained; he believes
it would just be logical to wait.
According to a recent Wichita Eagle article, however,
the EPA told ethanol trade group Growth Energy that
it expects to approve an increase of the blend limit
to E15. This was quoted from Dave Vander Griend, a Growth
Energy board member who reportedly said in Wichita,
Kan., on Oct. 7 that the EPA will approve E15 for vehicles
2007 and newer this week and for 2001-06 models by the
end of the year.
and wheat up
also enjoyed a big boost from Friday’s USDA estimates,
though it likely had less to do with lower projected
yield and more with anticipated ending stocks. The USDA
dropped expected harvest from its September report by
75 million bushels, or 2 percent.
drop came in estimated U.S. ending soybean stocks for
2010-11, from 350 million bushels last month to 265
million in October – a decrease of more than 24 percent.
Hackett observed, “Everyone sort of knew (the USDA was)
going to move the ending stocks down because of increased
wheat stocks were also down from last month, from 902
million bushels to 853 million, a decrease of 5 percent.
Wheat futures also surged last Friday; analysts for
both CBOT and the Minneapolis Grain Exchange said this
was “spillover” from the bullish outlook in corn futures.
that right now, other grain markets are “tagging along”
with corn, even though this summer’s news about the
Russian and eastern European wheat harvest ruin is what
he believes got people interested in the grains market
“The world does not have a wheat problem,” he said,
explaining farmers overproduced wheat last year. If
U.S. growers plant the high number of acres expected
and harvest well, he added, and if Russia has a normal
season next year, “we’ll be buried” in wheat.
In one respect,
Georgantones said the change from USDA’s September to
October reports isn’t surprising – it’s the gap in the
year where the biggest changes show up. But he’s still
not sure why there were such wide discrepancies.
back in July I thought we were staring down a record
crop,” he said.
to the quarterly USDA Grain Stocks report dated Sept.
30 and said he thought its data was designed to keep
corn prices from going too high at that time. The revised
data released last Friday, he said, has created a market
frenzy – “They’ve gotten the market more fired up,”
“I sure hope
(farmers) would learn the lesson from 2008 and don’t
worry about ‘Is it going to be $6? $6.50? $6.75?’ …
A farmer’s always got something to sell” if it goes
even higher, he said, adding he would advise growers
to sell a high percentage of their corn to lock in a
high price now, rather than waiting to see just how
high corn can go before it falls (since he also said
he can’t imagine it exceeding $6).
Georgantones said, will “get really hurt” by the increase
in grain futures, just as they were getting hopeful
about increasing numbers. Hackett said if grain futures
stay up only a month or two before coming back down,
he thinks livestock producers will expand. If they stay
up 3-6 months, he said it will have a negative effect
on livestock numbers.
to stocks and grain futures in 2008, Hackett said the
current picture isn’t that bad. Prices aren’t as high
and soybean and wheat stocks aren’t as tight – and even
with tight corn stocks, higher ethanol production means
more distillers dried grains (DDGs) livestock producers
can buy to mix with feed.
He does not
think the commodities market will see 2008 prices this
time. “All these numbers are guesses by the government,”
he said, adding yield actuals could end up being higher
than the Oct. 1 estimates.
As long as
South America has a good growing season, he said world
demand should be met – and if it doesn’t, the world
should know by February, when U.S. farmers generally
make their planting decisions, to adjust accordingly.
get really bad if we had a weather problem in South
America or next year in the U.S. … if we had another
Russia somewhere,” he said, adding Russia’s current
weather trouble is rare.
just supply and demand that drives futures. Hackett
estimates 30 percent of the grain commodities market
is supported right now by long-position investment from
outside agriculture, such as from speculative and index
growing (economically) in any fashion, but if you look
at the stock market (Dow Jones Industrial Average) approaching
11,000, somebody out there has some optimism, somewhere,”