MARKET UPDATE

   Up Up and Away seems like a better title for my post as the corn markets are setting new highs for now.  USDA reports of corn inventory and planting projections for the 2011 growing season show inventory of grain is low compared to current usage rates.  Planted acres of corn are projected to increase but it will also take a better than average growing season to replace supplies to a comfortable level.  May corn traded at 7.70 in Chicago and I hear a lot of talk of over $8.00 corn.  Although hog inventory is down compared to several years ago it is up 1% from last year.  Ethanol plants are running heavy as oil prices are setting highs also.  The biggest problem I see is that Iowa, being the largest pork producer and largest ethanol producer, and other locations are using more corn than is available locally.  Basis (the price difference between Chicago Board Of Trade and local prices) may get wider than normal as users compete for available bushels.  Corn users may have price coverage at Chicago prices but still be at risk on basis.
    The August USDA report was terribly inaccurate but their January report signaled an upcoming shortage of corn.  Most livestock producers I talked to have all of their feed needs covered.  South Korea is just stabilising their Foot and Mouth outbreak and are down by 3.5 million head of cattle and hogs, reducing feed demand accordingly.  Reports are also stating the ethanol plants have their corn covered also.  China is expected to import another 100 million bushels and how much of that is contracted I don't know.
    The question of how high prices go at Chicago is how many users need to buy corn at that price that day.  The other question is, is corn available at your location the day you need it.  If your supplier is short of corn the price in Chicago is irrelevant, only the price you pay to get delivery.  Basis is that price difference and basis may well be the difference between profit and loss on both livestock and ethanol.
    I will give my projection on price trends and remember that this is free and worth exactly that.  Corn will not trade at the CBOT over $8.25 for any sustained time period unless weather is terrible and at some point will also trade below $7.25.  Local prices are going to be + $.50 more than normal quite often.
   Did you know that on average there are only 2 cents worth of wheat in a loaf of bread, so if wheat doubles on the farm, your prices should not change more  than another 2 cents.
                                                      Serving together, Dean Lundeen