Thursday, July 19, 2012

Crop deterioration is real


The crop conditions report tells all oft the story why corn has rallied against all other commodities. These conditions move into uncharted territory on what will be the price reaction. Many have been comparing this to 1988, but the corn market was very different at that time. There was no ethanol demand. The industrial use of corn was much less. The demand response will be different in 2012. The magnitude of the price rise and the size of deterioration is such that buyers have not made plans for the future based on current prices. Most will agree that price will decline next year, but buying decisions have to be made now. Production adjustments cannot be made. The yield is in the hands of nature, so the price response will have to be on the demand side.

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