Posted on 02/06/2011 9:39:48 PM PST by FromLori
Cotton, wheat, rice, and now corn. If revised Chinese import estimates by the US Grain Council are even remotely correct, look for corn prices of $6.80 a bushel at last check to jump by at least 15% in a very short amount of time. As the FT reports, "Corn prices – and with them, the price of meat – are set to explode if the latest import estimates from China are correct. The US Grain Council, the industry body, said late on Thursday that it has received information pointing to Chinese imports as high as 9m tonnes in 2011-12, up from 1.3m in 2010-11." Why is this a concern? Because "the US Department of Agriculture, which compiles benchmark estimates of supply, demand and stocks, forecast Chinese imports at just 1m tonnes in 2011-12." In other words, the whole forecast supply-demand equilibrium is about to be torn to shreds. And all this excludes the impact of neverending liquidity by the one and only, which will only make the speculative approach to surging corn relentless.
For those who think that there is any even remote hope of a respite in the endless climb in prices, we suggest reading the following:
The most China has imported in modern history is 4.3m tonnes in 1994-95 and 3m tonnes in 1978-79. For most of the past 50 years, Beijing has been largely absent from the international market, as domestic production was enough to meet demand.
But Terry Vinduska, the chairman of the council, said after visiting China that “estimates given to us were that China is short of 10m-15m tonnes in stocks and will need to purchase corn this year”. He pointed to about 9m tonnes in imports. “We learned the government normally keeps stocks at 30 per cent but they are currently a little over 5 per cent, which may lead to imports of 3m-9m tonnes.”
It is not the first warning of forthcoming massive imports. Recently, David C. Nelson, at Rabobank, one of the world’s largest lenders to the global agribusiness industry, warned that because China’s animal protein industry is so large, the order of magnitude of China shifting to become a net importer of corn could possibly be measured in tens of millions of tonnes, and in just a few years time.
“We note that China could become a net importer of 25m tonnes of corn as early as 2015,” he said. Senior executives at trading houses took note of Rabobank’s forecast. Is corn set to be another soyabean?
The US Grain Council did not disclose where it got the information and Chinese food import policy is erratic. With corn nearly at a record high, the country could very well opt to further drawdown stocks.
But the forecast of record imports still need to be taken seriously. When China started to import soyabean back in 1995, few thought the country would today be buying nearly 60 per cent of all the global trade in soyabean. While China waving it in needs little explanation for the observent ones, here's what this means from a third party:
Most of the traders I have spoken to believe that China will become a big corn importer, although none believe it will follow the same pattern as in soyabean. Even so, 9m tonnes is a huge number. Enough to push corn prices above the 2007-08 record of nearly $7.65 a bushel. In early trading on Friday, corn was at $6.65 a bushel. And with six sigma floods, record cyclones, massive snowstorms and abrnomal climatic patterns now a near-daily event courtesy of the Jet Stream having decided to take a sabbatical, the only thing the grains and softs market needs is a lit match to set the whole thing ablaze. Luckily we have our very own chaircreature doing his best to make sure that the commodities market makes eating an activity best enjoyed by those who will be bailed out by the administration the next time there is a downtick in the market.
Well, I guess there won’t be anymore “starving kids in China”.
But let’s keep using corn as fuel! That makes sense... not.
I’ll believe Republicans are serious about cutting government spending when they abolish farm subsidies. As John Wayne used to say, “That’ll be the day.”
Buy fertilizer.
all I know is I’m going have to really do some shopping at Costco....the big stores carry the big cans of corn....
Anything we can sell them at a fair price, we should
Sure just preparing you all for food inflation here :)
“...and just a couple of weeks ago, the EPA announced that they would mandate an increase of ethanol usage in gasoline by 50%! 40% of the US corn crop was already going into ethanol. Do the math! And corn in storage is near 35-year lows already. It’s a good thing this grain has a golden color because it will be worth its weight in the yellow metal soon.”
does this mean we can stop giving farmers AG subsidies now?
I have the old plow out by the barn; guess I better start looking for a mule & some hitching harness for it.
1 pd wheat/loaf of bread @ 50 lbs/1,000 sq ft, X 43,560 sq ft/acre -50% weather, pest, and wild life losses... = 1/2 acre split by wheat, oats, rye, & barley; and maybe 25’ X 25’ of field corn to feed the feathered egg machines.
That just leaves pellets for the rabbits to buy.
Never thought I’d have to turn into a Hippie hillbilly after I “retired”.
Maybe time to get rid of the ethanol supports? Ya think!
corn bump
And corn prices still have to double to get near the inflation-adjusted prices to give the farmer the same return as he had in August, 1973, just before the Six Day War and the Arab oil embargo shot fuel prices through the roof.
People in the US have had cheap food on the backs of farmers for nearly 40 years.
Thanks to the Fed and the Free Trade yahoos, we now have a situation where we have a huge trade deficit with China and about the only thing we have to export to China is food.
The Chinese can buy a tremendous amount of food with the trade surplus they have in US dollars that they no longer want to keep in the form of US Treasury debt.
And after the corn is used in ethanol production, it is used for animal feed.
Which was the majority of the US field corn market in the first place.
Here’s a listing of various animal feed products and prices:
http://agebb.missouri.edu/dairy/byprod/AllCompanies.asp
See that “distillers grain” in the listings? That’s the by-product of ethanol production. “Wet” means just that, “dried” means the moisture was cooked off for denser transport.
More grain sales by U.S. farmers means more wealth at home. This is good because it is a renewable resource that can be expanded by planting on more land.
I’d rather it be used for something, anything HERE than putting it on a barge and sending it to China, for a great deal less profit.
Nothing’s wasted in ethanol anyway, the byproducts are used for animal AND human feed.
Meanwhile a close friend of mine here in Iowa has raised hogs for ages but now he's about to go out of business due to corn prices.
The ethanol boondoggle was doomed from the start as it takes more resources to manufacture than the fossil fuels it's supposed to replace. It doesn't even break even economically...which is why it has to be subsidized by us taxpayers.
I guess ethanol looks good on paper and in theory, but when you get down to the farm it's another story.
Shouldn't coal be cheap in Newcastle?
We produce almost all of the world's surplus food. Our capacity to grow is so much we pay farmers to NOT grow, so that the oversupply will not bring the prices down even further.
If there is a surplus of supply, even after it is artificially kept low, and a growing but limited demand, why shouldn't prices be cheap at the point of production?
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