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| In regards to 07 and 08 corn demand, ethanol is the wild card. The projections for corn to ethanol are mostly based on projections of plants that will be operating durring the marketing year. It is a moving target. IMO, USDA will be slow in adjusting the corn for ethanol number lower but they have been taking baby steps. For the 07 crop it went from 3.4 to 3.2. The offset was like amount of bushels increase in exports, and Yes, and exported bushel means more to demand than ethanol (no by product) BUT forward margins on ethanol are negative. There have been several announcements regarding plants that will be put on hold, not expanded and others where construction has stopped and even heard of a small plant that was in operation thet shut down. That being said, how can they stay in business? Most of the data that is used in figuring "profitability" uses 2.6-2.8 gal/bu. I am not sure, but I bet the newer plants are doing better than that and possibly 3 gal per bu or greater. If we have capacity to make 8 bil gal of ethanol, and the conversion is 3 gal per bu, that means 2.66 BBU of corn, not 3.20 BBU or greater. Still great demand but with that said, we could possibly afford to give up a few corn acres. Also the stox/use ratio is not quite as high as 05 but it is close. The challenging thing is, we still can not afford a drought in 08. $4.00 08 corn looks attractive. If prices drop I can bet that my inputs do not drop. I cant sit and jump in and out of the market of try to out guess the thing so a % sold at $4.00+ cz8 looks to be a good bet. Not sure if corn goes to $5 or to $3. I dont think I want to be left out of a rally so I will keep a large % unsold for the chance at $5, but puts against the unsold in case we see $3.00 or less. One could argue that the puts are a waste of $$. In 06 I lost $$ on puts and selling the rest of my 07 puts today at a loss but good carry to CN8 and not a bad price and not a bad yield. Also, my GRIP insurance will expire worthless as well. | |
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Some Info.
