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Middle Tennessee | Okay, sorry for the salacious thread title. But I posted below drivel to my blog, please pardon any impersonal 3rd person references, just trying not to direct anything too ad hominem,
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Sometime between early Monday morning and midday Wednesday, farmers went from enjoying their coffee to realizing that the value of their on-farm crop inventory was collapsing. The dollar drop in the cash value was the biggest event in the grain market since the atomic bomb USDA stocks quarterly report in March. Unlike a USDA report, when almost nothing happens and causes a big move, in this case, literally nothing happened. Because I can’t stand overuse of the adverb “literally,” I’ll give a little rain and a cool forecast pushed deeper into the summer, and rumors that South American corn and or beans had made it up the Mississippi as far as St. Louis.
Some, including a forthright cash-corn buying executive many follow on my favorite farmer chat board, say the market collapse is a result of farmers en masse releasing huge quantities of stored corn. Others say that corn itself is apocryphal, and that a small number of buyers, in loose coordination or in a feedback cycle, have the power to generate market moves like the current one from thin air, and that they have an interest in doing so. To an extent, even the corn buyers have acknowledged this, predicting that the cash implosion would occur suddenly, the moment their book fills extended to harvests out of Texas, Louisiana and Arkansas.
Some others have noted that the collapse is regionally spotty, and there may yet be shortages in areas to the East and elsewhere, and that at the current discount, supply could continue toward exhaustion before the harvest movement can adequately tide use. Further, no one doubts that farmers have good available storage for whatever corn they have, and there’s a risk farmers will sell very little corn. In fact, that’s exactly what many experts are advising farmers to do. Of course, anyone with corn has to consider if they are making a bad condition for themselves worse but keeping grain against the force of some very determined selling and only a few short weeks before a potentially very large crop.
This breaks prospects down to three possibilities. Prospect 1 is end users are satisfied with corn contracted now, and anything else coming up the river is just gravy, and prices just keep sinking. Prospect 2, end users still need more corn, and they will be able to procure it even at steep price discounts because farmers have been bluffed into selling, and prices do not recover. Prospect 3, end users need more corn, and the corn either doesn’t exist or the farmers won’t give it up, and we get one more good solid rally fueled by some heavy short liquidation into summer. | |
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Mass Hysteria
