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The corn crop is gone, says Dennis Gartman, and despite already high prices, corn and...
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Wednesday, July 18, 2012, 10:41 AM ETThe corn crop is gone, says Dennis Gartman, and despite already high prices, corn and corn-related shares should be bought on any weakness. Stay away from fertilizer stocks, however tempting as they may be as a proxy to corn. Buying them on the premise that laying more fertilizer will save the crop is just a "silly idea," Gartman quips. Fertilizer may be needed next year, but right now, anybody who's laid some down already wishes they hadn't because the crop is completely destroyed. (video)
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This news story has 36 comments:
There will be a corn crop this year, but it appears it will be significantly reduced from what we need. There are plenty of ramifications to this.
There are a lot of differebt ETF's but which is the best play?
A premium account is needed for the graph in your link but using their top few exporting nations, I found the following interesting graphs:
U.S. exports by year: http://bit.ly/LrQ34L
Argentina exports by year: http://bit.ly/LrQ3BN
Brazil exports by year: http://bit.ly/LrQ34L
Ukraine exports by year: http://bit.ly/LrQ3S4
Looks like U.S. massively dominates but there's also a trend over the past 5-10 years of the second-tier exporting nations dramatically increasing exports while the trend in U.S. export level has been flat (though with volatility) since 1980.
Link please.
http://bit.ly/MKbcrD
In this article, the author also states (as I did above) that a by-product animal feed is made from the ethanol manufacture process. The USDA now restates the amount of corn ethanol usage to not include the corn by-product feed, counting that as feed rather than ethanol usage. It is an attempt by the USDA to restate the figure in more palatable terms to the American consumer, who thinks making fuel out of corn or food is ridiculous. The by-product though comes from ethanol production.
Here's what it says:
"Without the clarification, a layman would figure that 40 percent of the U.S. crop went into ethanol production."
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"But the real story is that one-third of every bushel used in the ethanol process returns to the animal feed market in the form of distillers grains, corn gluten feed or corn gluten meal. When you consider this, corn used for ethanol drops to 23 percent of U.S. corn production, a big difference."
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"I doubt that critics of corn for ethanol will ever mention this, but just in case, according to the Renewable Fuels Association, the ethanol industry is expected to produce more than 39 million metric tons of animal feed in 2010-11, enough to produce 50 billion quarter-pound hamburgers – or seven patties for every person on the planet."
Again, I'm not a fan of using ethanol as fuel but I'm also not a fan of dishonesty. If the exact same same kernels of corn are producing BOTH ethanol (for drinking as well as for fuel, btw) AND livestock feed, it's untrue that these kernels are being diverted away from food use for the sake of ethanol fuel use.
But corn gluten feed utilizes and is composed of what is left over AFTER producing ethanol. So yes since roughly +/- 1/3 of the ethanol production results in the corn gluten feed. So-- the USDA says let's count roughly 1/3 of the bushels as feed not as ethanol. That's how they get at the figure. But it takes 40% of the corn to make the ethanol.
The article linked above is from Southeast Farm Press, and I read their magazine, and they are, for obvious reasons, pro-ethanol.
Let's put it another way... for every 10 ears of corn, 4 are used to make ethanol.
No, they're used in a multi-output process that produces both ethanol and livestock feed. Ethanol extraction is just the first step in that process. Gluten is protein and ethanol is made from carbohydrates. These are two distinctly different components of the grain. They're not in competition at all. A valid question to ask, however, would be What percent of carbohydrate would otherwise go for food usage?
Disclosure, fertilizer stocks conprise a bit over 1% of my portfolio. I will buy more on any significant dips.