Study Group: Farmers

GLG News^SM Analyses by this Study Group's Leading Experts(?)

Midwest crops look deceptively good

July 24, 2008

Analysis by:Philip Corzine, General Manager,

Analysis of: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.

Improving weather and falling commodity prices may keep RFS intact

July 24, 2008

Analysis by:Philip Corzine, General Manager,

Analysis of: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.

Ethanol import tariff is now on the table, but move by Brazilian sugar industry could backfire

July 9, 2008

Analysis by:Philip Corzine, General Manager,

Analysis of: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.                    

Failure to adjust policy now to lower feed costs will permanently change the US livestock industry.

July 1, 2008

Analysis by:Philip Corzine, General Manager,

Analysis of: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. 

Five percent increase (or less) in Brazilian soy acreage likely, unless fertilizer prices can be brought down in Brazil.

June 27, 2008

Analysis by:Philip Corzine, General Manager,

Analysis of: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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