Filed under: Corn, Farm, history | Tags: biofuels, Corn, economy, ethanol, farm, harvest, history
I have been reading farm commenters as they talk about how low corn prices are and how there does not seem to be any reason for the prices to go up in the near future. Some brave souls have started to talk about the possibility of corn prices reaching a bottom. Of all the reasons I read, there is one that I do not see. It’s the memory of corn prices of over $7.00.
We have had an incredible run of over a year with corn prices between $7 and $8 in my area. I understand that this has destroyed some demand, but not all of it. End users in my area are still bidding over the Chicago Board of Trade price to get corn. With current bids near $5 they are only getting in a trickle, just enough to keep going. Farmer holding is tight.
After over a year of plus $7 corn prices, farmers have money in their pockets and are not really in a hurry to unload their last corn. They are remembering the prices of last year, and hoping that maybe we can get close to those prices again. For now, they do not need to sell their corn on hand, and are holding on tight.
As a bit of a carrot out there is the need for feed grains in China. China is in need of protein for its people, the preferred protein in China is pork and the newly affluent people of China are demanding more. To keep up with that demand China has decided to import feed grains to feed their pigs, and they are still willing to pay for it.
Also holding corn price prospects high are the once again profitable ethanol plants that dot the Midwest. With corn prices lower, and oil prices high, they are once again making money. My local ethanol plant has paid over Chicago price for corn for most of the last year despite the high prices we did have earlier. Now with profit margins rising, I expect every ethanol plant to start bidding aggressively for corn.
Farmers have long memories for high prices, and when he has money in his pocket, he is not about to sell for what he considers less than his due. I expect to see some tight farmer holding this fall as the crop comes in. It will take either some really panic worthy prices, which I do not see coming, or some good run-ups in prices to unlock those bin doors. There are built in expenses to cover, and until prices cover those expenses, I do not expect much corn to move into the market.
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