Heil Harvesting, Ulysses KS/Limon CO | I am an ethanol fan. I hope the price stays up. Hope for the best but prepare for the worst. Like I said I would not sell the board right now.
Ok...
#1-Iowa-there is a tax credit in Iowa for selling Ethanol-25 cents per gallon sold (at the pump). Too boot there is a 6.5 cent tax credit back to the plant for every gallon sold. That increases the subsidy by OVER 50%. Ok, thought one, however that bid is probably not too far out of line with any other state. Granted. But Iowa will be the last to be hurt
#2-For keeping numbers equal we will ignore basis: Corn today-509 on the board, 650 is another 25% increase in price. 550 is a 10% increase. We aren't there yet.
#3-Lets just assume that ethanol does work at 650. Does feeding cattle work at that? You eliminate that demand-What happens to price?
#4-Ok. We are still competing with 90 plus dollar crude, (90.71 a barrel close today). What happens if the supplies are really as high as the report is forecast to say?
#5-Probably most important-How much of that corn was hedged against an upward move in price?
I hope that the funds don't bail, but weakness they will. They hold a huge portion of the long contracts are owned by them. What happens to price if they bail even if demand is there? I hope you guys are so right and I come in here in 6 months and corn is 7$, and when it does I will come in and say the same thing. I don't care what you or anyone else does to market. You have to be realistic and objective with it no matter what though. think about the other side.
There are a lot of things to consider other than that price on the board. Shoot the funds could bail because they do not like the technicals, in fact they usually do bail when technicals look bad.
Check ya later.
Edited by beh 1/25/2008 21:47
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6.50 are you out of your damned mind????
