Death comes to us all. Life's but a walking shadow | Under Scott Irwin's post below; "USDA Corn & Soybean Estimates" we managed to highjack a perfectly good topic and carp about USDA's estimates which was totally unfair to Scott. The upshot of this was that Ray Jenkins asking the question: "armed with all this information, how should farmers change their marketing plans??" Leave it to Ray to ask the really important question.
Unfortunately I am not ready to answer that question for myself, yet but I am thinking about it. But what his question did accomplish is to get me to think about "why is it that carryout is so important"?
To answer that I looked at the past few WASDE reports and plotted price as a function of total usage and Sept carryout. The two plots are below. I used $4.30 for the 2013-14 price because it is only reported as a range between $4.10 and $4.70 at this time. What I hadn't understood before is that like the ethanol " blend wall" there is an apparent "usage wall" which I have indicated with a arrow.
Now when you go look at carryout you "see how end-users respond, namely "as long as the supply is adequate I'll only pay just enough to get my needs filled."
So the proper response for producers is to "sell only as much as you need to" and even then only sell it on rallies.
The last message of the price vs carryout graph is that for every 100 million bushel change in carryout the price changes by about 30 cents. Which by the way was exactly what happen last week when the USDA lowered the carryout from 1792 to 1693.
For what it's worth.
Edited by 1234 1/19/2014 08:37
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 (price vs carryout-page-001.jpg)
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Ray Jenkin's Question.
