Smart Talk On Grain Futures: "The Other Side of the 2019 Corn Rally"

The corn and soybean markets, because of substitution effects from the producer level on down, are very intertwined despite being very different and having very different end-uses.
From DTN Progressive Farmer:

The Other Side of the 2019 Corn Rally

We haven't seen Friday's close yet, but we can already say it's been a good week for corn prices. USDA's somewhat surprising decision on Tuesday to go ahead and reduce its estimate of new-crop ending corn stocks from 2.485 billion bushels (bb) to 1.675 bb didn't have much hard data behind it, but few can argue it wasn't a more accurate step in the right direction. 

I'm not shy about pointing out disagreements with USDA's estimates at times, but this was a decision I have to applaud. It's refreshing to see an act of common sense while we're all waiting for more reliable data to emerge. Speaking of data, the work for USDA's acreage report is being compiled during the first two weeks of June, with results due out June 28.

After USDA reported 83% of corn and 60% of soybeans planted as of June 9, we can see USDA's June 28 estimates will be rough approximations and in need of further refinement. The June 28 report will not be as accurate this year as it normally is, but it will offer an improvement to the 3 million acre planting reduction that USDA set out June 11. USDA's second shot at planting estimates will be released on Aug. 12.

We can all keep making guesses about how things will turn out but talk is cheap at this point. Every June day that goes by with a wet seven-day forecast staring us in the face (especially in the Eastern Corn Belt) adds more weight to the argument that corn's bull market chances are for real.

On Thursday evening, the DTN National Corn Index settled at $4.20 a bushel, the highest selling opportunity since late June 2014, and a bullish indication of how quickly market sentiment has changed since May 10 when the same index closed at $3.27. 

That quick gain of nearly a dollar a bushel is nothing to sneeze at, as it represents the difference between holding corn in a bin at a loss and now having a chance at a modest profit. Of course, everyone now wants to know how high corn will go and that's why we're all punching various acreage and yield estimates into our calculators, trying to get a handle on what's possible.

Two weeks ago, I gave two examples in this column.

I don't believe in betting on magic predictions, but I do think it's important to keep in mind any scenario that puts U.S. ending corn stocks under 1.2 bb is at risk of seeing corn prices trade sharply higher, possibly at prices with a $5 or $6 label in front.

Again, I am not interested in whipping up a bullish frenzy, but for anyone thinking about selling December 2019 corn futures as a hedge on 2019 production, make sure you have financing in place for adequate margin. This summer's prices could get frothy.

As 2019 corn prices go higher -- fueled by unusually harsh planting conditions -- 

the outlook for 2020 corn prices is becoming more bearish. (DTN ProphetX chart) 

Related to that point, as this 2019 rally in corn prices plays out, it is also a good time to keep an eye on the December 2020 corn contract. Priced at $4.20 1/4 on Thursday's close, the more bullish the 2019 corn market gets, the more bearish the outlook for December 2020 corn prices becomes.

USDA's current U.S. ending stocks-to-use ratios for corn and soybeans are currently 12% and 25%, respectively for 2019-20. That is the widest supply imbalance between the two crops, weighted toward soybeans in at least four decades.

Suppose, for example, we get to the end of 2019 and see 2019-20 estimates of U.S. ending corn stocks at 1.4 bb or 10% of annual use and at 1.1 bb or 26% of annual use for soybeans (or maybe more). Just imagine the off-the-chart incentive to plant corn in the spring of 2020 in that situation.

If a producer can get a favorable price, making forward cash sales of 25% of 2020 corn production may not be a bad idea this summer. Going above 50% of production increases the danger of not knowing how much corn one may be able to produce in 2020....MORE

See also his May 31 piece  "Estimating Ending Corn Stocks, Prices"

Just to make things interesting, in Kansas farmers can shift between corn and wheat and in fact last year acreage devoted to wheat declined to 100 - year lows while corn production ranks #6 in the country.

Wheat 7.7 million acres
Corn   5.3 million acres

Corn: "Crop conditions dip again" as New Crop Hits Contract High (CORN; DBA; MOO)

From the Des Moines Register:

The condition of the corn and soybean crops continued to deteriorate through the week ending Sunday, with the percentage of the U.S. corn crop rated good to excellent by the U.S. Department of Agriculture dropping from 60 percent last week to 57 percent this week. A year ago 70 percent of the U.S. corn crop was rated good to excellent.

Dryness continues to be a problem over most of Iowa. State Climatologist Harry Hillaker said statewide average precipitation was 0.68 inch while normal for the week is 0.95 inch....MORE

The headline at Reuters Africa:

 GRAINS-US new-crop corn hits contract high as ratings fall

The University of Illinois' farmdocDaily talks about a subject I mentioned in August 12ths "Lend Me Your Ears: If Corn Futures Are Headed to Record Highs, End Users Will Have to Ration Use (CORN)":

Following up on yesterday's "USDA lowers corn yield estimates"
Actually it's more triage than rationing but in the trade the mental model is that price rations who can afford the feedstock.

Hog and cattle farmers tend to stop bidding first, sending herds to slaughter rather than continuing to feed and potentially locking in losses.
Then food producers stop bidding as the end user consumer balks at paying more for their high-fructose-corn-syrup enhanced packaged food.

Lastly the ethanol producers who, thanks to the mandated use of the product, tariffs on imports and the tax credit have the money to bid.

That's the food chain, in "Brainpower Nation" we burn our food to appease Al Gore and the Gods of Iowa.
(that heretic has recanted but he waited until the industry was entrenched)

From farmdoc:
Pork Producers Ability to Pay for Corn

This year’s corn crop is not big enough to meet the entire consumption base that has been built. Prices will have to be high enough to convince some end users to reduce consumption from current levels. Can the pork industry compete with other end users?


The answer is complex and will depend on many factors including how small the U.S. corn crop is and production in the southern hemisphere this winter. Ultimately the question is how high corn prices have to be to get a sufficient number of end users to reduce consumption. 

The largest competitor for corn in the coming year will be the ethanol industry where USDA analysts currently estimate 5.1 billion bushels of corn use. To meet the mandated domestic Renewable Fuels Standard (RFS) will require about 4.7 billion bushels with nearly 400 million additional bushels used to make ethanol that will be exported. The 5.1 billion bushels of mostly mandated usage is 39 percent of the 2011 crop.

Mandated corn use was troublesome to the animal industries when corn was abundant. Now with short corn supplies, the concerns are even greater. Clearly use of 400 million bushels of a limited corn supply to produce ethanol to be exported to countries like Brazil is far beyond the intent of Congress in the 2007 energy legislation that established the current RFS. The short corn supply increases the odds that some end users, including the animal industries, will appeal to the EPA to consider exercising the emergency clause to reduce ethanol mandates for 2012.

Without a reduction in mandates, the cut-back in corn usage will primarily be thrust upon the non-fuel sectors represented primarily by the domestic animal sector and corn exports. There has been a general assumption that foreign customers would reduce consumption as prices rise, however in 2007/08 foreign customers increased purchases. Given the low value of the dollar and strong desire of many foreign governments to do what they can to moderate food inflation, the question remains whether the foreign sector will cut U.S. corn imports this year.

In 2007/08 the domestic livestock industry could not pay more than $6 per bushel for corn. That is no longer true as reduced per capita production over the past four years has increased farm level prices for animal products. Corn prices will have to move to new record highs on a marketing year basis to get animal industries to reduce corn use....MORE

And that, boys and girls, is why your bacon costs more than a year ago and will be higher yet next year, after the hog farmers give up.

There will be some bargains in-between as the herd gets slaughtered causing prices to dip.
I may be in the market for some cold storage property.

"As EV popularity grows, Illinois corn farmers turn to aviation as a possible market for ethanol"

 It was just a couple days ago that I was jabbering away:

"‘Magical thinking’: hopes for sustainable jet fuel not realistic, report finds"
Along with using corn ethanol for any purpose other than drinking, green aviation fuel is one of the dumbest ideas in energy since....since...since Germany decided to shutter their nuclear power plants because of the tsunami that followed the earthquake in Japan.....

And the very next day we see a combination of two different ideas into one really bad idea.

From the Chicago Tribune, May 15:

Reid Thompson, a fourth-generation farmer in central Illinois, is in the middle of planting season. Weather permitting, he tends to the fields in the morning, walks home for lunch with his wife and newborn, and then returns to his tractor until sundown. He’ll harvest his corn in early fall, sell it to a nearby ethanol plant, and eventually it will make its way to a car’s gas tank. That’s the routine, at least for now.

Nearly all U.S. gasoline contains ethanol to reduce emissions, and nearly all of that ethanol is made from corn starch. But, electric and hybrid vehicles offer even further emissions reductions. This poses a threat to corn demand that could be devastating for a state such as Illinois, the second-largest corn producer in the country.

The resulting decline in the value of Midwestern farmland and corn prices will hurt farmers and have ripple effects across rural communities, predict University of Nebraska at Lincoln agricultural economists Jeffrey Stokes and Jim Jansen. Rural businesses that cater to the agriculture sector could go under, property taxes that fund local schools will likely plummet and farmers could be forced to default on debts to community lenders, the economists forecast. This would come after farmers have been hit by a series of misfortunes over the last five years: the pandemic, trade wars, inflation and excess supply.

Corn could be the key to solving another clean energy dilemma, though. Unlike cars and trucks, planes are difficult to electrify, and some fuel companies believe the answer to cleaning up aviation lies in America’s heartland.

“(Corn is) the cheapest, most sustainable, most scalable feedstock (raw material),” said Patrick Gruber, CEO of Gevo, one of the companies with plans to turn corn ethanol into aviation fuel.

Thompson and other corn farmers are eager to seize this opportunity in sustainable aviation fuel, another term for jet fuel made without fossil fuels.

“As I sit here and look at the next so many years of my farming career, as maybe my father starts to retire and maybe one of my kids wants to farm, I wonder what’s going to keep us here longer. And to me, that’s sustainable aviation fuel and the ethanol demand,” said Thompson, a father of three. “I mean, there’s got to be a home for our corn because that’s what we grow.”

But, before corn ethanol-to-jet fuel can be a viable alternative to conventional jet fuel, the emissions associated with corn ethanol production must come down. This will require farmers to change their practices on the field and ethanol plants to implement controversial technologies like carbon sequestration.

The rise of electric vehicles
Since 2005, the federal government has required transportation fuels to be blended with increasing amounts of renewable fuels such as corn ethanol to reduce air pollution, greenhouse gas emissions and dependence on foreign oil. The mandate transformed rural economies across the Midwest. Between 2008 and 2016, corn prices rose by 30%, and 26% more land was converted to cropland than would have been otherwise, according to a 2022 study published by the National Academy of Sciences.

Ethanol plants quickly sprang up around corn fields, due largely to investments from farmers eager for the new market to succeed.

“It’s just another avenue of capturing some of that value of my product,” said Thompson, whose parents and grandparents were early shareholders in One Earth Energy, an ethanol plant 15 miles east of his primary farm that he sells to today.

The six states that grow the most corn — all in the Midwest — also account for 70% of the nation’s fuel ethanol production, and it’s a huge market. More than 98% of U.S. gasoline contains ethanol, and 94% of domestic ethanol is made from corn starch. The rest of the ethanol is mostly derived from wood and field residues, including stalks, stems and leaves.

According to a 2021 U.S. Department of Energy analysis, corn ethanol offers 40% tailpipe emissions reductions compared with gasoline. But, the National Academy of Science study suggests carbon emissions from using land to grow corn may negate, or even reverse, tailpipe emissions reductions. When land use changes are factored in, corn ethanol may be more than 24% more carbon intensive than gasoline, according to the 2022 study.

Electric vehicles, on the other hand, have no tailpipe emissions. So, in pursuit of the national mission to achieve net zero by 2050, the federal government has shifted its efforts from cleaning gasoline-powered cars to promoting battery-powered cars with emissions mandates and tax credits. Electric and hybrid cars accounted for over 16% of new light-duty vehicle sales last year, more than a 3% increase from 2022.

In March, the EPA finalized “the strongest-ever” pollution standards for passenger cars, light-duty trucks and medium-duty vehicles. The rule was designed to accelerate the adoption of hybrid and electric vehicles.

The EPA’s decision will also “decimate the ethanol industry and corn demand,” the Illinois Corn Growers Association said in a statement shortly after the standards were announced.

Today, roughly 30% of Illinois corn production and 40% of all U.S. corn production is used to make ethanol.

While corn farmers are cognizant of the threat battery-powered vehicles pose to their family businesses, they’re quick to mention the volatility and infrastructure challenges the emergent industry faces. Ford and GM recently scaled back production of electric vehicles and Tesla had mass layoffs....

....MUCH MORE

U.S. Corn Production and Supplies In Storage

From SeeItMarket:

March corn futures moved slightly higher this week, closing up a ½-cent per bushel week-on-week, finishing on Friday (1/13) at $3.58 ½. The market focus all week was on the USDA’s January 12^th WASDE report, which contained not only the U.S. and World supply and demand revisions from December, but more importantly finalized 2016 U.S corn and soybean production figures both nationally and state-by-state.

A full summary of the report is as follows:

USDA JANUARY 12^th WASDE REPORT SUMMARY:

• RECORD U.S. CORN YIELD AND PRODUCTION – Thursday’s report revealed only minor tweaks to the U.S. corn balance sheet. In corn the USDA lowered the 2016/17 U.S. corn yield -0.7 bpa versus November to 174.6 bpa. However that yield figure still represented a crop-year record high, exceeding the previous high-water mark of 171.0 bpa from 2014/15. Total U.S. corn production was forecasted at 15,148 million bushels versus 15,226 million in November and the average trade guess of 15,196 million. Again despite production falling slightly below the average trade guess, it too reflected a new record high, eclipsing the prior record from 2014/15 by an incredible 932 million bushels.

• RECORD STATE CORN YIELDS – A number of the major U.S. corn producing states experienced record growing seasons in 2016; however none bigger than Iowa and Minnesota. Iowa achieved a final state corn yield of 203 bpa versus its previous record of 192 bpa. This resulted in Iowa corn state production of 2,741 million bushels. Minnesota’s state corn yield was finalized at 193 bpa versus its previous record of 188 bpa. Minnesota’s state production was 1,544 million bushels. Therefore collectively Iowa and Minnesota’s combined 2016 corn production totaled 4,285 million bushels, which as a point of reference would theoretically make those 2 states the 3^rd largest corn producer in the world by country (trailing the U.S. as whole and China, while exceeding the next largest corn producing country of Brazil whose 2016/17 production is currently estimated at 3,405 million bushels). The other major corn producing states achieving record yields in 2016 were North Dakota (158 bpa), South Dakota (161 bpa), and Wisconsin (178 bpa).

• MASSIVE U.S. CORN ENDING STOCKS – 2016/17 U.S. corn ending stocks were lowered to 2,355 million bushels versus 2,403 million in December. The USDA did increase corn-ethanol demand 25 million bushels to 5,325 million, which seems appropriate following yet another weekly ethanol production record of 1.049 million bpd reported on Wednesday. That said the USDA did NOT increase U.S. corn exports leaving them unchanged at 2,225 million bushels even with year-to-date sales exceeding last year by +72% as of the week ending 1/5/17. Overall the revised ending stocks estimate still reflects a 29-year high, offering continued overhead price pressure on rallies (see U.S. corn stocks chart on page 4).

...MORE

358.75 up half a penny 

FinViz

 

U.S. Corn Futures Market Outlook: Bulls Need A Catalyst (we may have one)

Note the "may", it's not a lock.
December (new crop) futures settled at 355'2 in regular trade last week, here's the recent action:

 

First up, See It Market, Sept. 3:

Corn Market – Weekly Highlights

Below is a list of key happenings in the Corn market and a few fundamental takeaways that traders should be aware of.  Further below is a section focusing on my price outlook for December Corn Futures.

• Monday’s Weekly Crop Progress report showed the U.S. corn good-to-excellent rating unchanged week-on-week at 62% as of 8/27/17 versus 75% a year ago. Ratings slipped in the Eastern Corn Belt (Illinois, Indiana, and Ohio); however only by 1 to 2%. Illinois still stands out from the standpoint of now having experienced a good-to-excellent ratings decline of 10% in just the past 2 weeks. That said with the Farm Journal Pro Midwest Crop Tour just recently having taken samples from various sections of Illinois and coming back with a state yield estimate of a respectable 181 BPA (versus NASS’s forecast of 188 BPA in August), the market once again seems largely disinterested in the direction and perceived yield implications of state crop ratings.

• Final takeaway from the Farm Journal Pro Midwest Crop Tour 2017: The Tour’s final U.S. corn yield forecast for 2017/18 was 167.1 BPA, just 2.4 BPA below NASS’s August yield estimate of 169.5 BPA. And while the Tour produced a yield projection less than the USDA’s, traders were quick to point out that in 4 out of the past 5 years the Tour has underestimated the “Final” U.S. corn yield by an average of -3.45 BPA (see table below). Therefore this would suggest a Final U.S. corn yield closer to 170.0 to 170.6 BPA remains a distinct possibility. Additionally the only year the Tour overestimated the Final U.S. corn yield was in 2015; however the differential that year was a largely insignificant 0.4 BPA. That said from purely a traders point of view, statistically speaking, this would suggest the lower-end of yield expectations should now be in the 166.0 to 166.5 BPA ranges....MUCH MORE

...Will corn continue to move higher this week? Unfortunately for Corn Bulls I still see plenty of overheard fundamental price resistance going forward. Informa Economics released its revised September U.S. corn production and yield estimates on Friday of 14.123 billion bushels and 169.2 BPA respectively. Both figures were only slightly below the USDA’s August projections of 14.153 billion bushels and 169.5 BPA. However what Informa’s estimates reinforced was that talk of this year’s U.S. corn yield dropping down to 164 to 162 BPA have now been tabled. The majority is coming to the conclusion that the 2017/18 U.S. corn yield will likely fall between 167 to 170 BPA. Even the low end of that yield range would leave 2017/18 U.S corn ending stocks above 2.0 billion bushels for the second consecutive year. That doesn’t support $3.80 to $4.00 December corn futures....

And from AgWeb, Aug. 29:

Frost to Creep Into Corn Belt As Early As Sept. 6 

The growing season has been anything but normal for farmers in the Corn Belt. They have been plagued with flooding, replanting, drought, not enough heat and other issues. Following the Farm Journal Midwest Crop Tour, many farmers have been praying an early frost won’t come their way.
But it could be knocking on their door much sooner than anticipated.

On AgriTalk, meteorologist Michael Clark of BAMWX.com told host Mike Adams parts of the northern and western Corn Belt could see a “strong cold front that could get sharply colder  next week.”...MORE, including audio

...With these factors aligning, Clark said on the morning of Sept. 7, lows could fall between 34 and 39 degrees—between 15 and 18 degrees colder than normal—that would be a “legitimate threat” of an exceedingly early frost....

What Might Temper Rising Prices: Yesterday's World Agricultural Supply Demand Estimate (WASDE)

From DTN Progressive Farmer:

5/12/2021 | 3:32 PM CDT
USDA Reports Review
New-Crop December Corn Falters on Bearish WASDE; Soybeans Maintain Strong Gains

While the May USDA World Agricultural Supply and Demand Estimates (WASDE) report featured little earth-shattering news for soybeans, it was new-crop December corn futures that reacted in a dramatically bearish fashion after new-crop stocks and demand estimates were more bearish than traders had anticipated. Overall, the crop report was fairly neutral for soybeans and bearish for both wheat and corn.

CORN

Corn ending stocks for the current 2020-21 crop year were dropped by 95 million bushels (mb) to 1.257 billion bushels (bb), about as expected. Old-crop corn exports were increased by 100 mb to 2.775 bb. The surprise came in the new-crop slot. Using the same acreage as in March planting intentions and a yield of 179.5 bushels per acre (bpa), corn production is estimated at 14.990 bb. That was just slightly below the average trade estimate of 15.07 bb and up 808 mb from last year. Inexplicably, USDA chose to drop U.S. corn exports by 325 mb from the revised old-crop number to just 2.450 bb. That comes despite the rapid decline of the Brazilian safrinha corn crop due to expanding drought. Ethanol usage was raised by 225 mb as the country recovers from COVID-19, but the fall in demand resulted in a new-crop carryout of 1.507 bb, or 153 mb higher than what was expected. The average farm price is projected to be $5.70 versus $4.35 this past year.

Globally, as mentioned, the Brazilian corn crop is wilting under current hot and dry conditions, and USDA chose to drop Brazilian corn production by 7 million metric tons (mmt) to 102 mmt (4.02 bb). That is still higher than most private analysts, leading traders to scratch their heads about dropping U.S. corn export demand in light of Brazil's reduced supplies and China's voracious appetite. Argentine corn production was left untouched at 47 mmt (1.85 bb). China corn imports were raised to 26 mmt for the 2020-21 year and kept at that same 26 mmt for 2021-22, further solidifying the demand base. World corn ending stocks rose by 8.8 mmt to a higher-than-expected 292.3 mmt (11.5 bb), with Argentine corn forecast 4 mmt higher at 51 mmt and Brazilian corn production forecast to be 16 mmt higher at 118 mmt (4.65 bb) -- all speculation at this point. 

The WASDE report was considered bearish for corn, but it is new-crop December that's absorbing much of the selling. No doubt part of the reason is that, following the meteoric rise in corn prices, it is expected that ultimate corn acreage could be well above the March seeding intentions....

....MUCH MORE

Here's the USDA WASDE page but the DTN Progressive Farmer commentary is some of the best out there.

Chasing high corn prices, U.S. farmers skip rotations

It is time to get rid of the ethanol mandates, before we destroy some of the best farmland in the world.
From Reuters:

Farmer Brian Schaumburg has planted corn for five straight years in some of the thousands of acres he tends in central Illinois.

Farmers who eschew crop rotations that help to replenish the soil with nutrients take a risk that yields will decline. But corn prices soared to a record earlier this year, making so-called corn-on-corn crops a worthwhile bet for many farmers in Illinois, the No. 2 U.S. corn state after Iowa.

"Last year and this year, we're seeing a little yield drag but, even so, corn pays," Schaumberg said from the air-conditioned cab of his crop-cutting combine as he mowed down tall corn stalks, gathering kernels of the yellow grain.

Schaumburg was in the early stages of harvest and so far was averaging roughly 180 bushels per acre in fields that grew corn last year, and about 200 bpa in corn fields that were planted with soybeans last year, with both yields in line with his averages during the previous few years.
"Corn on corn hurts in some places but there's places it's awful good," he said.

Down the road, farmer Dave Eyer was not faring as well. One field that was planted with corn last year yielded roughly 125 bpa, down 30 to 40 bushels from a year ago, after scorching weather in July stressed the crop as it pollinated.

"The plant knew there was something wrong and it only put out so many kernels to be pollinated," Eyer said.
Another field planted for seed corn was expected to yield nothing and Eyer said he would claim insurance for it.

"It was so hot, it killed the pollen," Eyer said. "It's not perfect every year. Weather is still the major factor."

FORECAST FOR LOWER YIELDS
Research firm AgResource Co on Friday cut its yield estimate 2 percent to 145.1 bpa, citing disappointing results from the early harvest. The forecast was below the latest U.S. Department of Agriculture estimate of 148.1 bpa.

Late planting, a lack of rain and hot temperatures have all been blamed for the lower yields. Dry weather can have more of a negative effect on corn-on-corn fields than corn that followed soybeans, said Emerson Nafziger, an extension agronomist at the University of Illinois.

"We are having some areas that have big yield hits on corn on corn. It's pretty specific to dry areas," Nafziger said. "Our working rule of thumb is 10 percent less on yields."
Still, it is a worthy trade-off for many farmers.

"They say corn is king for a reason. It has the highest yield for any of the crops we grow," Nafziger said....MORE

"CORN and Next-Gen Commodity ETFs"

From Hard Assets Investor:

Newcomer Teucrium Trading made quite a splash on the commodity ETF scene last year with the Teucrium Corn Fund (NYSE Arca: CORN), the market’s first pure-play corn futures ETF. The fund, which holds a basket of future contracts across the curve, has already attracted more than $42 million in assets just six months after its launch. In fact, CORN has been so successful that the firm has already filed for five additional funds, including ETFs in natural gas, crude, sugar, soybeans and wheat.

When it comes to commodities, Teucrium co-founder and president Sal Gilbertie is no novice. Gilbertie has worked in the space since 1982; most recently, he was Newedge USA’s head of Renewable Fuels/Energy Derivatives OTC execution desk, and an active market maker and derivatives trader. Prior to that, he was principal and co-founder of Cambial Asset Management and Cambial Financing Dynamics, a boutique investment bank.
HAI Editor Lara Crigger sat down with Gilbertie to discuss Teucrium’s success, including the economic pervasiveness of corn, what’s really behind CORN’s high expenses, and why if interest rates rise, futures-based ETFs could essentially be considered free. 

Crigger: As analysts and pundits look toward 2011, one common theme seems to spring up again and again: food prices will rise. What do you think? 

Gilbertie: While we’re not in the business of making price calls—our business is making products—my take on it is that, yes, globally, we are running pretty tight.
Most people not in the agriculture or food space would be shocked at the pervasiveness of agricultural commodities in our economy—particularly corn. And I’m not just saying that because we have a corn fund. Corn is the second most pervasive commodity in the world, behind energy.
For example: You take your SUV and pull into a service station. You’ll use a bushel of corn in filling up your fuel tank; fuel is the second largest use of corn. When you walk into that station and buy that beef jerky snack? There’s corn’s number one use– in animal feed for protein consumption. The three and four top uses are sugars and starches, which you get when you grab your bottle of soda to drink with your corn chips. Oh, and that bottle the soda’s in is likely made from polymers created from corn– for certain, the safety seal comes from corn-based polymers. Then, when you sign your credit card slip, that piece of paper is held together by cornstarch. Corn is everywhere.

But what people don’t understand is that even though corn is grown every year, its inventories are pretty low. We don’t have the stores on hand to get through a massive crop failure. Every year, the supply side of agriculture is a tenuous situation: If you put one seed in the ground, you have just one season, one shot, to grow it in. If there’s any blip in production, even a minor pullback, you have a problem. The world can come together and solve a metals supply shortage, but there’s nothing anybody can do about a crop failure.

Crigger: Given that corn is so integral to our economy, why do you think it took so long to see a pure-play ETF on the commodity?

Gilbertie: Two reasons. One, the barriers to entry are pretty significant, and even since we launched Teucrium, they’ve become even more significant. One, it’s simply expertise: Bringing commodities knowledge into a securities space is really hard. Two, it takes a lot of resources – money and time and a lot of hard work to bring one of these products to the market. It took a year solid, maybe 18 months, just focusing on corn to bring it to market. That’s significant time and capital.

The first generation of commodity funds out there were all created by financial professionals, so they were financially engineered by bankers, financial professionals, and so on. They had a really good concept, but the next generation, where Teucrium is, is significantly better. We’re making commodity-specific improvements to what’s out there, so some of the pitfalls that happen with prior products won’t happen with ours....MORE

Corn Hits Six Year Lows, Recovers A Bit; Wheat Hits Lowest In Ten Years

	Last	Chg
Corn	334-0s	-0-2
Soybeans	953-0s	-8-4
Wheat	401-2s	-4-6

From Agrimoney:

Corn futures sharply pare losses on export hopes...

Corn futures tumbled to six-year lows - only to recover on the news that the Brazilian government is working to open up its livestock feed sector to genetically modified corn from the US.

Corn had a weak start to the session, after weekly US Department of Agriculture overnight reported better-than-expected US crop ratings. 

The USDA saw corn condition at 76% good or excellent, despite the hot weather, where markets were expecting at 1 point drop in condition.

And the development of corn is well advanced, having got through the crucial month of July with no severe heat damage, with 91% of corn in the silking stage.

Favourable crop outlook.

Meteorologist Gail Martell said the good crop condition, and a benign weather outlook "points to a favourable corn harvest in the making. 

"Summer growing conditions in corn have been mostly favourable, though not ideal.

"Rainfall has been ample, promoting strong growth and development in corn," she said, although some periods of heat have "proved detrimental".

But the warm June temperatures, along with ample rainfall, "has spurred corn development," Ms Martell said. 

The prospect of ample US supply pushed December corn futures to session lows of just $3.29 a bushel, the lowest level for second-month futures since late 2009, but prices pared losses later in the session.

Brazilian demand

Rich Nelson, at the US broker Allendale, ascribed the change in mood to "a new story out there".

This was an announcement by the Brazilian government that it was working to allow the import of more varieties of genetically modified US corn, for use in the country's livestock industry.

Shipping corn to Brazil, the world's second ranked corn exporter, during the middle of its' second crop, or safrinha, harvest might seem like sending coals to Newcastle. 

But a crisis in corn supplies is developing in Brazil's southern livestock regions, sending prices soaring.

A long period during which the currency was very weak, making Brazilian corn highly competitive in international markets, lead to heavy exports.

Brazilian stocks were depleted, and much of the current crop was forward sold.

Now, with estimates of the safrinha crop ever declining, the corn supply is getting very tight....

...Wheat extends losses to 10-year low

But Chicago wheat markets plumbed a fresh 10-year low, under pressure from the weight of world supplies.

Adding to the bearish tone was the news out overnight that Japan and Korea had both taken steps to restrict US imports, due to concerns over unapproved genetically modified wheat verities.

And Gasc, the stat grain buyer for Egypt, appears to have curtailed its buying in Tuesday's tender, taking just one 60,000 tonne cargo, of Russian wheat.

...MORE