Wednesday, January 20, 2010

I could see the irony...

After listening last weekend to Dan Basse (AgResource) talk about 2B+ corn carryovers in 2011 and beyond, and sensing the slightly higher chance of a return to recession as stimulus spending falls from favor, I find one policy switch reason by the NCGA on climate change legislation curiously timed.
 "Finally, this analysis indicates HR 2454 will result in diverting productive farmland into afforestation (newly planted forests) or perennial grasses solely to gain offset credits. Although our analysis shows dramatically less acreage diversion than noted by the U.S. Department of Agriculture, it still diverts land needed to feed and fuel a hungry world and therefore affects both food security and energy security." [More]
This is not unreasonable by any means, but how high would the corn carryout have to get (or how low would corn prices have to drop) before cries for "set-aside" begin bubbling up in meetings?  

For that matter, how many of us are looking forward to the release of Conservation Reserve acres?
The large decline in winter wheat seedings may be problematic for corn and soybeans and other spring planted crops. The six million acre decline in winter wheat seedings along with additional acreage released from the Conservation Reserve Program opens the door for large increases in the acreage of spring planted crops. While a few more corn and cotton acres may be needed to accommodate the expected rate of consumption in 2010-11, a large South American harvest implies no need for more soybean acreage. Favorable growing conditions, then, could result in a surplus of one or more crops in 2010.

An additional concern for crop prices is the continued lackluster performance of the national economy and the persistently high unemployment rate. These factors do not bode well for demand prospects for agricultural commodities for food or fuel consumption. The lack of economic growth, along with emerging indications that Iraq could substantially increase oil production over the next several years, may prevent an increase in crude oil prices that would support the biofuels industry. [More]

As usual Darrel states it about as dryly as humanly possible. (I fell asleep in mid-sentence).  But it is also is an indicator he may be closer to the truth than most.

What if we get a really good growing season? I don't think E-15 will soak up that much corn very quickly, if at all. (Good article in current issue of Farm Futures - not available on line yet). I had a discussion with a broker from TX who said his getting gas retailers to switch will not be a cakewalk. It does present some infrastructure puzzles. More tanks? Tough beans for pre-2001 car owners?

My guesses are 2.2B bu. and/or $2.40.

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