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Townhall Finance...
American
Farmers Still Deliver Bumper
Crop
By Mike Shedlock
7/7/11
Grain
futures are sharply lower across
the board as traders had positioned themselves for shortages because of
Midwest
flooding and increasing demand from emerging markets and China.
Instead,
corn stocks were 11 percent
bigger than analysts expected and a bumper crop could be on the way
according
to the report.
Please
consider Grain markets plunge
on US acres, stocks
The
U.S. corn supply is far larger
than thought and a bumper crop could be on the way, the Agriculture
Department
said on Thursday in a report that shocked traders and shoved grain
markets
sharply lower.
Farmers
defied expectations by
planting significantly more corn acres despite rain and floods, and
sky-high
prices curbed demand which left June 1 stockpiles 11 percent larger
than
traders had predicted.
The
dramatic turnaround from fears of
bare-bones supplies could signal comfortable supply levels for the
coming year
and ease fears about high world food prices.
“American
producers stepped up,”
[USDA’s] Vilsack told Reuters Insider.
At
the Chicago Board of Trade, corn
for July delivery was down 10 percent, or 72 cents per bushel, at $6.26
in
morning trade, and deferred contracts were locked down the limit of 30
cents
per bushel. The July contract is in its delivery period and trading
without
limits.
July
wheat was down 8 percent, or 49
cents, to $5.92-1/4. July soybeans were down 1 percent, or 19 cents, to
$13.15-1/4.
Red-hot
demand from corn exporters,
livestock feeders and processors had been expected to consume every
bushel
grown in 2010 and eat into reserves, but the higher stocks number was a
sign
that demand has been rationed.
“We
planted more acres than the trade
had thought earlier in the year because we sent the signal to plant,”
said
analyst Don Roose of U.S. Commodities. “The other thing was, we did
find a way
to slow down usage.”
The
USDA said the corn stockpile was
3.67 billion bushels on June 1, and it pegged plantings at 92.28
million acres.
With normal weather and yields, a record-large crop could be harvested.
The
soybean stockpile was 4 percent
larger than anticipated by analysts, although plantings were 2 percent
smaller.
The soybean crop would still be the third-largest on record, but
supplies are
expected to run tight for another year.
Wheat
stocks were 4 percent larger
than traders expected and plantings were down marginally.
The
USDA reports imply that corn
growers would harvest 13.5 billion bushels of corn, which would be a
record,
and 3.2 billion bushels of soybeans, which would be the third-largest
on
record. Both estimates are Reuters’ calculations and assume normal
weather
conditions and yields.
A
mammoth crop would fatten the corn
stockpile to nearly 1 billion bushels, but soybeans would run tight
through
fall 2012.
December
corn was limit down 30 cents.
However, front month contracts are in delivery warning period and there
is no
limit. Those playing front-month contracts on expectations of a lousy
crop
report were massacred.
Inflation
Outlook
With
crude prices falling and corn
hammered, expect the next set of CPI figures to be tame.
Bear
in mind I do not consider prices
to be a valid measure of inflation. Oil rising because of peak oil has
nothing
to do with inflation. Nor does rising grain prices based on flooding.
Nor does
demand from China have anything to do with inflation in the US.
Thus,
this plunge has nothing to do
with inflation or deflation either.
Inflation
and deflation are monetary
phenomena. As far as inflation goes, these price movements are noise.
However,
for those who think price is what matters, prices are headed down.
Interest
Rate Outlook
If
oil and food prices continue to
drop, ECB president Jean-Claude Trichet may change his tune on rate
hikes. Of
course Trichet will be out of the picture soon as his term expires in
October.
In
the US, the Bernanke Fed got
another signal to keep rates excessively low.
Read
it with links and charts at
Townhall Finance
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