*****Food Crisis Fears Grow As Corn Prices Surge*****

The Financial Times reports that corn prices surge to two-year high.

(emphasis mine) [my comment]

Corn prices surge to two-year high
By Javier Blas in London
Published: October 11 2010 08:48 Last updated: October 11 2010 08:48

Corn prices hit a two-year high on Monday, jumping more than 8 per cent, as traders scrambled to buy after the US Department of Agriculture warned last week of “dramatically” lower supplies because of bad weather.

Corn prices have surged more than 15 per cent over the past two days, making the jump one of the biggest in recent history and prompting some analysts to warn that the world was fast moving into ANOTHER FOOD CRISIS.

In early trading in Chicago on Monday,
CBOT December corn surged by an expanded daily limit of 45 cents, or 8.5 per cent, to $5.73¼ per bushel, the highest since September 2008.

In normal circumstances,
the daily limit in Chicago is 30 cents, but the exchange widened the barrier to 45 cents after the market closed on Friday after corn prices rose 30 cents during the final session of the week.

Analysts believe
corn prices could hit $6 a bushel, a level only seen during the peak of the 2007-08 food crisis, which saw the cost of agricultural commodities from corn to rice hit record highs, sparking food riots in poor countries.

“Meaningfully higher prices are now required in order to ration demand, principally ethanol consumption,” said Lewis Hagedorn, agricultural commodities analyst at JPMorgan in New York.

The USDA shocked traders by forecasting in its monthly report on Friday that the country' s corn farmers would harvest about 12.7bn bushels in the 2010-11 crop year that started in September. This is down 4 per cent from the USDA' s previous estimate.


The drop would slash the country' s stocks to 900m bushels, the lowest level in 14 years.
The USDA also cut wheat and soya production estimates.

The US is the world' s largest corn grower and its exports make up the majority of global trade in the grain. The USDA had earlier forecast a record corn crop this year but a combination of unfavourable heat and heavy rains forced a re-evaluation of yields. The USDA cut yields to 155.9 bushels per acre, down from an earlier estimate of 162.5 bushels. The monthly reduction in yield was THE LARGEST ON RECORD.

The surge in corn dragged up wheat, soyabean and palm oil prices. The weakness of the US dollar against other currencies, including the yen, also propelled the rally.

In Chicago, CBOT November soyabean surged to a year high of $11.79 a bushel, up 3.9 per cent on the day. CBOT December wheat rose 1.5 per cent to $7.30 a bushel.

The meat industry has warned of a “game changer” in prices and profitability due to the surprise contraction in the US corn supply.

Meat analysts forecast
higher prices for beef, pork and poultry as producers pass on higher feeding cost.

On Friday, the USDA warned of a “much tighter supply picture” for corn and barley, the two main feedstocks used to fatten cows, sheep, pigs and poultry.

Shares of some of the world' s largest meat producers fell sharply on Friday, but
shares of fertiliser producers and sellers of farm equipment such as tractors soared.

Newag Talk reports that Crisis Fears Grow As Corn Prices Surge.


Crisis Fears Grow As Corn Prices Surge
by Philip Haddon on Oct 11, 2010 at 15:21

Warnings from the US about its poor harvests have led to fears of an impending food crisis, as soft commodity prices soar.

some commentators are predicting a repeat of the global food crisis seen in 2007-2008


Noonan says
Monday's moves in the corn market were certainly 'fundamentally-driven, not speculator-driven,' and that although most investors had been expecting more bad news on corn, the severity of the USDA's announcement last week caught many off guard. 'With such a dramatic report, the USDA has caused a lot of uncertainty. The previous downward adjustments had been incremental, but this was a dramatic drop,' he said.

The Financial Times reports that soaring prices threaten new food crisis.


Soaring prices threaten new food crisis
By Gregory Meyer in New York and Javier Blas in London
Published: October 8 2010 18:32 Last updated: October 8 2010 22:06

Fears of a global food crisis swept the world's commodity markets as prices for staples such as corn, rice and wheat spiralled after the US government warned of "dramatically" lower supplies.

An especially hot summer in the US, droughts in countries including Russia and Brazil and heavy rain in Canada and Europe have hit many grain and oilseed crops this year. This has raising concern of a severe squeeze in food supplies and a repeat of the 2007-08 food crisis.


"I think we have a food crisis right now," said Hussein Allidina, head of commodities research at Morgan Stanley.

In Chicago,
the prices of agricultural commodities jumped so sharply that they hit limits imposed on daily movement by the city's futures exchange, the biggest in the world.

Traders, unable to use futures contracts because of the limits on trading, bid indicative corn prices to $5.65 a bushel in the options market, a rise of 13.3 per cent on the day.

In Paris, European wheat prices rose 10 per cent, while the cost of other commodities including soyabeans, sugar, cotton, barley and oats soared.

The rise in prices sent the Reuters-Jefferies CRB commodities index to a two-year high.

"This revision highlights that we are in a very fragile supply and demand situation," said Abdolreza Abbassian, senior economist at the UN Food and Agriculture Organisation in Rome.

The US is the world's largest corn grower and its exports make up the majority of global trade in the grain. The USDA had earlier forecast a record corn crop this year but a combination of unfavourable heat and heavy rains forced a re-evaluation of yields.

The fall in supplies has prompted countries such as
Russia and Ukraine to impose EXPORT RESTRICTIONS on grains.

Big importers in the Middle East and North Africa have STARTED TO HOARD SUPPLIES, which has further tightened the market.

Reuters reports that U.S. corn jumps by daily limit to hit 2-year high.

U.S. corn jumps by daily limit to hit 2-year high
By Manolo Serapio Jr and Valerie Parent
PARIS/SINGAPORE Mon Oct 11, 2010 1:27pm BST

PARIS/SINGAPORE (Reuters) -
"Any period of time where you get two consecutive limit-up days, it's likely to spur a little bit of panic buying as some people try to get in before they perceive it being a little too late," said Luke Matthews, a commodity strategist at Commonwealth Bank of Australia.


"It's not surprising the market reacted the way it has," said Paul Deane, an agricultural commodity strategist at ANZ.

"People were of the expectation the USDA would cut (its yield estimate by) 2 or 3 bushels, but nothing as dramatic as they did, cutting to 156 bushels."

Corn could breach $6 a bushel "reasonably comfortably," given the market's shock over the magnitude of the cut, said Deane, a level not seen since August 2008.


CORN HAS RISEN 77 PERCENT since its June low of $324-1/2 a bushel,
but it is still around 25 percent shy of the 2008 peak of $7.65 a bushel. WHEAT IS UP 71 PERCENT from the June low and 45 percent lower than the 2008 high.

My reaction: The USDA finally had to face reality last Friday. The world now is a little more informed on how badly out of balance the supply/demand picture is.

1) The US Department of Agriculture warned last friday of "dramatically" lower corn supplies because of bad weather.

2) The monthly reduction in corn yield was the largest on record.

3) Corn prices have surged more than 15 per cent over the past two days, hitting a two-year high.

4) The severity of the USDA's announcement last week caught many off guard.

5) Fears of a global food crisis are swepting the world's commodity markets as prices soar.

6) The weakness of the US dollar against other currencies also propelled the rally.

7) Expect higher prices for beef, pork and poultry as producers pass on higher feeding cost.

8) Big importers in the Middle East and North Africa have started to hoard supplies.

9) Russia and Ukraine have imposed export restrictions on grains.

10) Corn has risen 77 percent since its June low of $324-1/2 a bushel

11) Wheat is up 71 percent from the June low.

Conclusion: As I wrote last week, agricultural commodities are heading higher. The 2010 food crisis, which began with the shortages this summer, will continue to intensify going into the end of the year, leading to panic and chaos.

--------------------------------

Farmer reactions to last Friday' s shocking USDA report

Below are some farmer reactions to last Friday's shocking USDA report, from talk.newagtalk.com.

Overnight trade..... Makes no sense.... [night before report came out]

--------------------------------

p-oed Farmer
Posted
10/7/2010 22:57 (#1387604)
Subject: Overnight trade..... Makes no sense....

Why would beans be up 14 on the eve of a potential bearish report?..........
This bean market has acted irrational for the last 9 months........ has stayed strong going against everyones expectations [not me, I expected it to stay strong].......Time will tell but today to me ..... It makes no sense [It makes sense. The USDA has been lying about the true demand/supply situation. Simple no?]....... p-oed


--------------------------------

msb
Posted
10/7/2010 23:11 (#1387641 - in reply to #1387604)
Subject: RE: Overnight trade..... Makes no sense....
Lapel, In

It would make sense if you were on the inside. And there are always a few who seem to have the inside track. …

holy cow

--------------------------------

paul the original
Posted 10/8/2010 13:00 (#1388187)
Subject:
holy cow

I was having the technicial working on my combine all morning, stuppid hydrailic blocks an electric controls. Was really bummed the soultion is a $1500 control block. He thinks, be back at 4:00 and see if that actually does it.... Think that will be 8 hours labor on top of it too by then.

First chance I got to come in & look at crop prices.

Wow. THAT MUST BE SOME REPORT THAT CAME OUT..... I'll have to catch up.

I was thinking of getting some beans sold be4 it came out, but was too tied up with the combine issue. Guess it's worth the new hysd block I need....

Holy cow. Is this going to be good for ethanol, other grain users? I don't ever like horrid swings one way or another. It tends to scare people off, and you need to woo them back. Nice to see crop prices go up, but limit up in the middle of a pretty good harvest, WHAT DOES THAT DO TO END USERS????

--->Paul

BINGO!!! THEY FINALLY GOT IT RIGHT!

--------------------------------

illiniwek
Posted
10/8/2010 08:34 (#1387969)
Subject:
BINGO!!! THEY FINALLY GOT IT RIGHT!

155.6


--------------------------------

illiniwek
Posted
10/8/2010 08:35 (#1387975 - in reply to #1387969)
Subject: RE: BINGO!!! THEY FINALLY GOT IT RIGHT!

(maybe)
corn limit up 3 days straight


--------------------------------

SeniorCitizen
Posted
10/8/2010 08:38 (#1387980 - in reply to #1387969)
Subject: Re: BINGO!!! THEY FINALLY GOT IT RIGHT!

Trimmed the oats, barley & sorghum.....and surprisingly the beans. Now, Plan B with one foot on the gas & one on the brake & watch Mr. Sack at the NYFed, Helicopter Ben & the 'growing green gills' crowd.

--------------------------------

Ironwood
Posted
10/8/2010 08:39 (#1387983 - in reply to #1387973)
Subject: Re: BINGO!!! THEY FINALLY GOT IT RIGHT!

http://www.usda.gov/oce/commodity/wasde/latest.pdf

--------------------------------

Norbachf
Posted
10/8/2010 08:41 (#1387986 - in reply to #1387980)
Subject: Re: BINGO!!! THEY FINALLY GOT IT RIGHT!
WC MN

WOW who would have thunk.

--------------------------------

illiniwek
Posted
10/8/2010 08:42 (#1387990 - in reply to #1387969)
Subject: RE: BINGO!!! THEY FINALLY GOT IT RIGHT!

Now we know WHY THEY 'FOUND' THE 300 MILLION BU FROM LAST YEAR. [See last week' s entry on how the USDA magically “found” 300 million bushels of corn]

--------------------------------

dennycrane
Posted
10/8/2010 08:43 (#1387993 - in reply to #1387990)
Subject: Re: BINGO!!! THEY FINALLY GOT IT RIGHT!
SW IL

exactly

--------------------------------

illiniwek
Posted
10/8/2010 08:44 (#1387995 - in reply to #1387969)
Subject: RE: BINGO!!! THEY FINALLY GOT IT RIGHT!

CZ should blow through $6.00 easy and quickly in my opinion.

powder keg one go boom, in the words of tara, "duck"

--------------------------------

Mizzou Tiger
Posted
10/8/2010 08:53 (#1388005)
Subject:
powder keg one go boom, in the words of tara, "duck"
SE IA-WC IL

Nt


--------------------------------

Les Grossman
Posted
10/8/2010 09:11 (#1388028 - in reply to #1388005)
Subject: Re: powder keg one go boom, in the words of tara, "duck"
Central IL

As many of us have discussed the past few months
it is hard to have huge losses in one or more of the I states and keep the yield up.


Who got this one right?

--------------------------------

scassell
Posted
10/8/2010 10:57 (#1388133)
Subject: Who got this one right?
South Central Wi.

I don't follow any experts
so who saw this coming?

--------------------------------

illiniwek
Posted
10/8/2010 11:00 (#1388134 - in reply to #1388133)
Subject: Re: Who got this one right?

most of us farmers had it nailed 30-45 days ago.

--------------------------------

scassell
Posted
10/8/2010 11:06 (#1388139 - in reply to #1388134)
Subject: Re: Who got this one right?
South Central Wi.

You are the guys I was following so thanks!

Speechless


--------------------------------

7150
Posted
10/8/2010 10:00 (#1388085)
Subject:
Speechless

It's not that I don't understand that corn yields are as low "relatively" as I've seen,
it's just that it worries me to see the USDA print such a shocking report. They even dropped the acreage and yields of beans somehow.

Someone once criticized us farmers for not believing these reports when they go our direction. Well ? . . . I'm criticizing this one. It's not that I doubt the numbers (well, maybe the beans), but I'm more used to seeing the reporting ratcheted up or down incrementally.
This has a shock factor, I believe, on purpose.

I'm certainly going to take advantage of this gift that should ensue but am fearful of
the manipulation the reporting service is capable of. They don't have to manipulate the numbers to manipulate the markets. Timing and presentation can do that all by itself.

--------------------------------

mcupps
Posted
10/8/2010 10:04 (#1388090 - in reply to #1388085)
Subject: Re: Speechless
SW Missouri

I am also speachless, so much for that 159 we would have all agreeded to print if we were the usda

--------------------------------

Pat H
Posted
10/8/2010 10:12 (#1388097 - in reply to #1388085)
Subject: Re: Speechless
Cropsey, IL


Isn't this goofy though - I'm not sure how they did it in the past, but these large swings are probably not good for anybody in the long run. Someone has to buy the stuff afterall (last time I check there are no bins on wallstreet). I sold beans into the report noting almost everyone's yields are good to best ever and I believe that to be reality. Corn yields are certainly down, but it's a big country and even Il is a large state - does it make sense to knock so many bushels off the average right now?

--------------------------------

mcupps
Posted
10/8/2010 10:13 (#1388098 - in reply to #1388085)
Subject: Re: Speechless
SW Missouri

What if they called it 155 now so they could "ratchet" it on down to the 150 mark? I know that my home farm is usually right with the national average, and it is sure not anywhere close to 150 this year. There is just so much 100 bushel corn out there this year. (in west, south and far east)


--------------------------------

mutt
Posted
10/8/2010 13:36 (#1388213 - in reply to #1388085)
Subject: RE: Speechless
nw Kansas

I don't think they have enough grain on hand to make the numbers work or wall street got in on the down side and told the usda what to say so they can make the big bucks.


--------------------------------

No_Till
Posted
10/8/2010 20:52 (#1388488 - in reply to #1388105)
Subject: Re: Speechless

Small crops usually get smaller. The idea is to give a factual report which I think they did looking at some other private estimates. They are to report not manipulate to make it supportive. Perhaps they added bu because the USDA knew that the ending stock are going to be in trouble. A lot of farmers were sceptical of the USDA not reporting the facts as they are. Now everyone is aware of the severity of the lower yields…

About '300 milion bu extra corn found last thursday'

--------------------------------

illiniwek
Posted
10/8/2010 09:23 (#1388038)
Subject: ADM Opening calls all limit......

probably no trade other than 1st minute today and monday.


--------------------------------

illiniwek
Posted
10/8/2010 09:30 (#1388047 - in reply to #1388041)
Subject: Re: ADM Opening calls all limit......

'300 milion bu extra corn found last thursday'
USDA HAD to find these bushels! The ending stocks this morning would have been 550 m bushels which figures to be $7.00-$8.00 corn.

--------------------------------

Mlebrun
Posted
10/8/2010 09:35 (#1388053 - in reply to #1388047)
Subject: Re: ADM Opening calls all limit......
SW MN

Yep exactly what I said last week. They HAD to add the 300 million to keep this thing from running away.

--------------------------------

Weathervane
Posted
10/8/2010 09:37 (#1388058 - in reply to #1388047)
Subject: Re: ADM Opening calls all limit......

The local elevator guys say that it will take two years to blend off the damaged corn they carried over from last year. Hard to say how long it will take for USDA to resolve that one. Maybe we are at 550 m already and just don't know it yet. I don't know what the usual damage is on shipments of corn, but you can bet it will be at least 5% for some time to come.

--------------------------------

IH-Harvester
Posted
10/8/2010 09:40 (#1388063 - in reply to #1388038)
Subject: Re: ADM Opening calls all limit......

Question is,
are those 300 mi actually somewhere or are they made up.

Where is the hate mail for the USDA today???

--------------------------------

djmcountryboy
Posted
10/8/2010 18:12 (#1388343)
Subject: Where is the hate mail for the USDA today???
Mascoutah, Illinois

I guess
the USDA screwed the end user today with this report. How could they do such a thing? …


--------------------------------

paul the original
Posted
10/8/2010 18:29 (#1388357 - in reply to #1388343)
Subject: Re: Where is the hate mail for the USDA today???

Guess I've read several that have mentioned this will be bad for dairy folk, etc.

Myself, I mentioned in a message
it woulda been better if the USDA didn't do things this abrupt - many here saw it coming, the USDA shoulda had a more even transition from 'we have too much 'to 'we might be short'.

The amount of corn we have is whatever it is.

The problem is if the USDA gets it wrong. Seems like fellas here were right: USDA got it wrong earlier.

--->Paul

--------------------------------

soil-life
Posted
10/8/2010 18:31 (#1388358 - in reply to #1388357)
Subject: Re: Where is the hate mail for the USDA today???
North Central Ohio, across the Corn belt !


In Other words,

They were way to Optimistic, way to Long


--------------------------------

No_Till
Posted
10/8/2010 19:59 (#1388437 - in reply to #1388421)
Subject: RE: Where is the hate mail for the USDA today???

I believe that
the USDA knew the crop yield report was going to be disasterous if they didn't pump up the ending stocks somehow. They did just that. It's just that they could only pump them up so far. Wait till they need to put that old corn in the pipeline.


--------------------------------

No_Till
Posted
10/8/2010 21:02 (#1388502 - in reply to #1388485)
Subject: Re: Where is the hate mail for the USDA today???

The shock and awe was still reeling from the Sept ending stocks figure.
Livestock feeders were just waiting for a cheaper corn price. After all that cheap feed from Et production. They didn't need to buy that expensive corn. The USDA will maybe stairstep down from here to a smaller crop. That'll be scary. They can't do that.


--------------------------------

farmer in Ontario
Posted
10/8/2010 23:07 (#1388727 - in reply to #1388654)
Subject: Re: Where is the hate mail for the USDA today???
Lucan, Ontario

Why is this even a thread on Market Talk.
The USDA has been highly erratic the past year and a half, thats the problem.

For months farmers have been posting here saying the yield was in trouble, yet USDA continued with the 165 number. Finally they backed it off to 162 something. Now 155.6, that' s just too much of a sudden drop.

So if you want to call it hate mail, well yeah count me in. Getting real tired of this GD yoo yoo BULL**** from one violent direction to another.
The way USDA is handling it, No one can figure this out anymore.

I would add
it' s not healthy for anyone: both the producer and the end user.

--------------------------------

No_Till
Posted
10/8/2010 23:25 (#1388763 - in reply to #1388727)
Subject: Re: Where is the hate mail for the USDA today???

...
Today's report made the market realize that Demand rationing will be neccessary. The Bu found was a blessing to the the endusers and I hope they took advantage of it. Everyone thought the guys from Ill were crying wolf. Ugh? Right??

The market and Tara almost had me convinced that the low yields were just a localized event. Hello Wake up call!

--------------------------------

farmer in Ontario
Posted
10/8/2010 23:39 (#1388786 - in reply to #1388763)
Subject: Re: Where is the hate mail for the USDA today???
Lucan, Ontario

I know, just wished
they could have backed the yield off, starting earlier, and more gradual. Someone's been tinkling in my cheerios I guess...

Two thoughts crossed my mind today:
Why didn't ProFarmer have a better peg on this. (Yoohoo thought they should have come in lower) Yet they were too scared to go away from the USDA number at the time.

NOW WHAT? $8.00 corn

--------------------------------

illiniwek
Posted
10/10/2010 11:33 (#1390123)
Subject: NOW WHAT? $8.00 corn

This really is going to get interesting now with Iowa and Minnesota producers starting to get real 'concerned' with their corn yields. ALOT of producers now seeing 20-30 bu less than expected, the same thing we (illinois farmers) saw when we started harvest in early September. IE. shallow kernal, small ears weights and rapid dry down. In my opinion $6.00 corn will be a bargain for end users 2 months from now. I will continue to be unpriced on 2010 corn and 2011 corn until I see real evidence of rationing, eth plant closures, export cancellations, livestock sector reductions etc.. In the meantime I am staying Texas hedged with physical unpriced, and that 'boat load' of cz calls locked limit up. I guess if I were to put a number on where this will spike 'high' capitulation would be in the 2008 $8.00 area.


--------------------------------

Jim
Posted
10/10/2010 12:14 (#1390173 - in reply to #1390123)
Subject: RE: NOW WHAT? $8.00 corn - grain quality varies enormously + interest rate rant
N IL - W WI etc

Keep in mind there is
an awful lot of poor quality 09 corn sitting in bins around the cornbelt that is certainly not worth $8. or even $5. and should be used for ethanol, not feed.

I sure hope
we don't export this garbage and shoot our future markets.

At some point grain quality has to enter the equation. Good quality 2010 grain should be worth more than
very poor quality 09 or earlier grain still sitting around in bins.

Blending it in tries to hide it but poor quality is still poor quality. That poor stuff should keep the ethanol plants going for quite some time.

There should be
an asterisk after these prices for quality.

jmho, Jim at Dawn


--------------------------------

BKN
Posted
10/10/2010 12:51 (#1390203 - in reply to #1390173)
Subject: RE: NOW WHAT? $8.00 corn - grain quality varies enormously
Josephine Co. Or...... NCIA

You mean
corn like this old crop pile I could smell as I drove by the other day.

Attachments
----------------
2010 Fall Harvest 075 (Medium).jpg (82KB - 6 downloads)
2010 Fall Harvest 076 (Medium).jpg (73KB - 2 downloads)


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cdi
Posted
10/10/2010 14:54 (#1390300 - in reply to #1390252)
Subject: Re: NOW WHAT? $8.00 corn
western Pa

I'm still half concerned
this is a big conspiracy by usda. Is this not crop ins. month for dec. futures? Lower yield, big run up in price, oops you don't have a claim anymore. Think I got my dates right

--------------------------------

cocodrie
Posted
10/10/2010 15:08 (#1390313 - in reply to #1390300)
Subject: Re: NOW WHAT? $8.00 corn
Mississippi Delta

you got your dates right,
been thinking the same thing!

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