GLG News by Mr. Philip Corzine, General Manager
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
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Midwest crops look deceptively good
July 24, 2008
Corn and Soybean Production Prospects Improving | www.farmdoc.uiuc.edu
The effects of late planting, cool-wet soils in May, and flooding in June can't be overcome by favorable weather in July and August. USDA's yield and production estimates may well turn out to be on the optimistic side when we finally get the crop in the bin.
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Improving weather and falling commodity prices may keep RFS intact
July 24, 2008
EPA delays RFS waiver ruling | www.ethanolproducer.com
The request for a partial waiver in the RFS by Texas Gov. Perry is likely to be denied, largely due to a 25% reduction in corn prices caused by favorable weather in the Midwest. This corn crop, however, will be extremely difficult to get an accurate estimate on prior to getting it out of the field, so future price movements will probably bring the issue of the need for changes in ethanol policies, around again.
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Ethanol import tariff is now on the table, but move by Brazilian sugar industry could backfire
July 9, 2008
Brazil launches campaign to remove ethanol tariff | www.ethanolproducer.com
Changes in the ethanol production subsidy and import tariff would be an excellent way to moderate the increases in the short-term price of corn, easing the pain for the US livestock industry. But any change in these policies will have long term impacts on the biofuels sector. These changes were already being discussed, so the move by the Brazilian cane industry may place them into the sights of the US biofuels and ag industry that has already proved itself ready and willing to defend itself against all challenges, both domestic and now, foreign.
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Failure to adjust policy now to lower feed costs will permanently change the US livestock industry.
July 1, 2008
American Feed Industry Association Urges EPA to Temporarily Waive RFS Mandate | www.grainnet.com
An over-emphasis on ethanol has combined with a poor production year and a major speculative push on commodity prices to push livestock net returns into the red. Animal feed has long been US corn and soybeans primary source of demand, but high feed costs, with no way to push up the selling price of their products, has created a situation that will soon, if not corrected, turn into a significant liquidation of the US pork industry. To push up commodity supplies, changes need to be made now in the US CRP program rules to push up 2009 planted acres. In addition, (possibly) temporary waivers in the ethanol subsidy and or import tariff should be considered to slow the conversion of corn into ethanol, keeping those supplies available for feed, and helping to ease the price of livestock feed.
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June 27, 2008
Brazil May Seize Fertilizer Deposits as Prices Surge | www.bloomberg.com
Just like this time last year, traders in Chicago may believe that Brazilian farmers are poised to significantly expand soybean acreage, as they have moved prices above $15 per bushel. However, just as they misjudged them last year, they may be doing it again, as fertilizer prices have doubled, and have brought potential net returns on Brazilian soy back down enough that a significant expansion is currently unlikely, unless fertilizer costs can be reduced, or prices go significantly higher, very soon.
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June 27, 2008
Options for the Conservation Reserve Program | www.card.iastate.edu
Expiring contracts may add two million acres a year to planted area in the US, but don't look for many contracts to be "broken" unless they were recently signed, as the penalty's are too severe, even with high commodity prices. It seems likely that given the current situation with a poor crop in the fields (flooding and late planting) and high prices, changes in the program are somewhat likely, and if they occur, they will have some market impact.
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USDA is being optimistic at best for 2008 planting expectations
March 3, 2008
ACREAGE AND YIELD TO THE RESCUE? | www.farmdoc.uiuc.edu
The USDA's most recent projections on planted area for corn, soy and wheat in the US for 2008 appear to be optimistic at best.
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Growth of non-traditional participants in ag commodities poses risks
March 3, 2008
Commodity Prices Surge, As Investors Seek a Haven | online.wsj.com
The ag commodity markets are trading on emotion, and to some extent, fear, without and regard for supply and demand, and the continued economic viability of that demand. The old market saying is that high prices are the best cure for high prices, but the "cure" may be a bitter pill to swallow.
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Seed refuge is easy to solve with convential methods,
March 3, 2008
DuPont Introduces New Insect Protection System to U.S. Farmers | www.soyatech.com
DuPont's new "in-the-bag" refuge system will probably steal some market share from Monsanto trait seed, until Monsanto introduces the same, but likely gains will be small due to the ability of producers to satisfy the refuge requirements with simple in-the-row methods.
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March 3, 2008
Deere rep says ag industry mostly insulated from economic downturn | www.brownfieldnetwork.com
The US ag sector is showing strong signs of being overheated, and is likely to see a correction soon. The question is, how far and fast will it fall.
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Agricultural fertilizer will remain in a demand-driven up-swing for the short-term
December 31, 2007
Potash Corporation: The Best Value in Agriculture Stocks Today | seekingalpha.com
Demand from the biofuels industry, not feed-based demand, is driving the rally in the commodities markets. Soybean prices have been high before, but high prices will eventually "fix" the supply shortage concerns. The weak US Dollar vs. the Brazilian Real is also one reason behind the high commodity prices, but with current prices, and assuming the Brazilian Real holds near its current level, Brazil may start to "fill the gap" on world soy production in the next 12 months. What happens in the biofuels industry here in the US is probably "the" key factor in predicting where commodity prices will be headed over the next 12-24 months.
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Past expansions in acreage in Brazil are just the tip of the iceberg
December 31, 2007
Brazil's Cropland Grows by 83.5% Over 1996-2006 | soyatech.com
The expansion in planted area in Brazil over the past ten years is impressive, but the potential exists to add 300-400 million more "new" acres in that country. The expansion has been held back by low domestic prices for soy, but that may be coming to an end. Prices for soy in Tocantins are only five Reals per sac below what we sold for in 2003, and there is now, the opportunity to turn a profit again in this sector. If conditions, ie: the exchange rate and soy prices on the CBOT, hold, we should expect a significant expansion in soy area in Brazil for the crop to be planted in the third quarter of 2008.
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Monsanto continues to do the right things to extend their lead in the race for market share.
December 31, 2007
Seed Controversy Sprouts: Some Say USDA's Insurance Break for Monsanto Customers Unfair | soyatech.com
A couple of dollars per acre might not seem like a lot of money, but on US operations that can cover several thousand acres, it can add up to several thousand dollars per year, and all for buying a product that they have already found to be a good investment for their operations. So although it seems small, it points out a company that is continuing to do all the right things, to command significant market share in the race to supply seed genetics to agricultural producers.
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Ethanol producers face continued challanges on both costs and revenues.
December 10, 2007
Has The Ethanol Boom Ended? | www.econ.iastate.edu
Lack of infrastructure is creating price-gluts, and low or negative margins for ethanol producers. This situation could continue for another two years, as improvements in infrastructure struggle to keep up with expansions in production of ethanol. Corn acreage is already at its highest level since 1944, and with the current price relationships, will have a hard time gaining more acres in the US. Regardless, expansion of ethanol capacity continues in the US, as there are more plants online, under construction, and in planning stages, than there was just 3 months ago. Iowa continues on the part to become a "corn deficit state", and basis levels have been turned on their ear all over that state.
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US Farm Programs Need To Focus On Stabilizing, and Stop Subsidizing
November 30, 2007
Editorial: Struggling farm billionaires | www.naplesnews.com
US farm programs have lost their focus, and are providing subsidies to farmers during a year of record incomes. In addition, a continued focus by the US government on expanding biofuels will do more to stimulate agricultural production in other countries, than it will here in the US.
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Higher Farmland Prices Help Balance Sheets, Loans and Estates, but Hurts Profits
November 26, 2007
U.S. Cropland Prices Shackle Some Farmers | soyatech.com
The biofuels boom is driving up prices for farmland across the US. Typical prices for top farmland selling with no development potential, are now around $6,000 per acre or more in Central IL. The higher prices are good for current owners, but bad for anyone renting land, which covers the vast majority of agricultural producers, at least in IL, where over 70% of land is owned by someone other than the operator. Cash rents for farmland have nearly doubled during this escalation in prices, cutting out a large chunk of the expanded profits, and passing it into the hands of the farmland owners. These higher prices and rents are creating a great deal of additional risk, as high commodity prices and average and above yields are being factored into budgets to allow them to cover the cost of higher rents.
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New biofuel feedstocks will be driven by effeciency and economics.
November 26, 2007
Seeding the way to better biofuels | seattletimes.nwsource.com
The adoption of new crops for biofeedstocks will be driven by how efficient the crops are (gallons per acre), and in how they fare economically (net returns per acre). Crops like camelina may be able to gain a foothold in regions where corn and soy are less viable, like the US west and northwest. Crops like Jatropha may gain a foothold in some regions of the world, likely in lower cost labor regions (at least initially), due to the high labor requirements. Jatropha, however, needs to develop better genetics, and a mechanized planting and harvest systems for it to be a significant source of biofuel. The perfection of cellulosic biofuels, however, will likely make all of these crops unneeded for fuel production, due to its higher efficiency, so all these crops probably have a limited window of opportunity to feed biofuels production.
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Good times aren't over yet for Deere
November 26, 2007
Deere Fourth-Quarter Net Rises 52% on Overseas Demand | www.bloomberg.com
The secondary effects of the world-wide ethanol boom are starting to show up in increases in prices, and in earnings, of which Deere is an excellent example. Expansion of sugarcane in Brazil is driving sales of Deere machines there, but the effects of the big US corn crop and record high commodity prices are yet to be fully appreciated in the US ag sector. If combine sales are an indication, next quarter should be another very good one for Deere.
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Negative Image + Falling Returns = Problems For Biofuels
October 31, 2007
Global Backlash on Biofuels Could Overshadow Future Potential, Says Worldwatch Institute | soyatech.com
The biofuels sector continues to be the focus of negative stories in the US and Global press, highlighting many of the downsides of the push towards ethanol and biodiesel. These stories, by themselves, might not create significant problems for the industry, but in combination with the twin economic challenges of high costs and low returns currently facing the new bio-projects, the added weight of increasingly concerned consumers could drag down the already slowing sector, even more.
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Find a way to spend more, rather than complaining about higher prices for commodities.
October 7, 2007
As Prices Soar, U.S. Food Aid Buys Less | www.nytimes.com
Ethanol and corn has been booming not because the US government called for it, but rather because there were opportunities for profits, largely due to oil prices. Subsidies for biofuels in the US should have a hard end-date. Dollars spent on food aid should increase, rather than expecting world commodity prices to decrease.
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