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The corn crop is gone, says Dennis Gartman, and despite already high prices, corn and...

The 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)
Comments (36)
  • Julius Ferraro
    , contributor
    Comments (495) | Send Message
     
    People haven't figured this out though. Not the biggest Gartman fan because he's wrong 90% of the time but it really is stupid to think farmers are running and going I must plant some more fertilizer everywhere especially in the heat!!!!
    18 Jul 2012, 10:44 AM Reply Like
  • Larry Smith
    , contributor
    Comments (2509) | Send Message
     
    The corn crop is NOT completely gone, that is disingenuous. The yield will be down, but corn will still be harvested. There are many fields that are irrigated and rain has fallen although it has been spotty.
    18 Jul 2012, 10:47 AM Reply Like
  • Lakeaffect
    , contributor
    Comments (1049) | Send Message
     
    Certainly "the corn crop is gone" is typical of noise generated by the likes of CNBC.

     

    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.
    18 Jul 2012, 10:58 AM Reply Like
  • wyostocks
    , contributor
    Comments (8244) | Send Message
     
    If he is right, what is the best way to play this?
    There are a lot of differebt ETF's but which is the best play?
    18 Jul 2012, 10:50 AM Reply Like
  • Lint
    , contributor
    Comments (391) | Send Message
     
    when it comes to analysts, you can be assured of one thing: things are never as bad as they say nor as good.
    18 Jul 2012, 10:53 AM Reply Like
  • SA Editor Stephen Alpher
    , contributor
    Comments (546) | Send Message
     
    Gartman going all-in? I smell top.
    18 Jul 2012, 10:55 AM Reply Like
  • kmi
    , contributor
    Comments (4042) | Send Message
     
    Retail is always late to the party when it comes to agriculture....
    18 Jul 2012, 11:39 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2862) | Send Message
     
    Question for S.A. readers: Is corn grown commercially outside the U.S.?
    18 Jul 2012, 10:57 AM Reply Like
  • mpcleather
    , contributor
    Comment (1) | Send Message
     
    Ever heard of Brazil?
    18 Jul 2012, 12:01 PM Reply Like
  • lindsay lopez
    , contributor
    Comments (40) | Send Message
     
    The movie or the country?
    18 Jul 2012, 12:35 PM Reply Like
  • Director one
    , contributor
    Comments (60) | Send Message
     
    Rectal research at its best..........this guy should polish his crystal ball...........what a loser........there are mitigating forces at work.........ie record new ground broken for corn.......It is not the end of the world........How many corn fields can he see from an office tower?
    18 Jul 2012, 11:04 AM Reply Like
  • Larry Smith
    , contributor
    Comments (2509) | Send Message
     
    Corn is grown in many countries, too many to list. But not every country exports Top exporters are http://bit.ly/MI2L02
    18 Jul 2012, 11:05 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2862) | Send Message
     
    Thanks, Larry.

     

    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.
    18 Jul 2012, 11:18 AM Reply Like
  • Larry Smith
    , contributor
    Comments (2509) | Send Message
     
    Wonder if the US export numbers are affected by our dumb ethanol policy.
    18 Jul 2012, 11:22 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2862) | Send Message
     
    I agree corn ethanol is just stupid but I don't know that it's actually a big use of the corn crop. Probably far more corn goes into HFCS. Possibly sugar prices will benefit from a corn shortage. I'd guess the single biggest use is animal feed. So what might replace corn for feedstock? Wheat? Rice? Soy? And is there a way to play the second-tier exporters in Argentina, Brazil, or the Ukraine?
    18 Jul 2012, 11:29 AM Reply Like
  • farmed out my savings
    , contributor
    Comments (355) | Send Message
     
    Ethanol accounts for 40% of US corn use. A livestock feed is made from the by product which is essentially corn gluten pellets.
    18 Jul 2012, 02:41 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2862) | Send Message
     
    "Ethanol accounts for 40% of US corn use"

     

    Link please.
    19 Jul 2012, 08:34 AM Reply Like
  • farmed out my savings
    , contributor
    Comments (355) | Send Message
     
    I saw an interview with an ag economist from Iowa State a year ago and that was what he stated. He was describing how corn is in so much more demand now because of that. I've seen the figure in multiple places. Here's one:

     

    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.
    19 Jul 2012, 08:57 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2862) | Send Message
     
    Your own link contradicts your statement, FOMS.

     

    Here's what it says:

     

    "Without the clarification, a layman would figure that 40 percent of the U.S. crop went into ethanol production."
    ...
    "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."
    ...
    "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.
    19 Jul 2012, 09:25 AM Reply Like
  • farmed out my savings
    , contributor
    Comments (355) | Send Message
     
    In my initial post I cite the 40% use and also mention that the byproducts are made into feed. I linked to the above link because it explains the complexity of it. I use corn gluten feed and am thankful for it, as it is cheaper than corn.

     

    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.
    19 Jul 2012, 10:27 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2862) | Send Message
     
    "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?
    19 Jul 2012, 10:33 AM Reply Like
  • elliot_mllr
    , contributor
    Comments (1339) | Send Message
     
    I believe that about 40% of US corn goes to ethanol.
    23 Jul 2012, 11:34 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2862) | Send Message
     
    elliot, you might want to read the above comments.
    23 Jul 2012, 12:16 PM Reply Like
  • elliot_mllr
    , contributor
    Comments (1339) | Send Message
     
    Thanks. I have and they are very interesting. The 40% number was given to me by a mid-Western corn farmer whose crop is presold at fixed prices for the year and whose crop is about 50% of what it should be.
    24 Jul 2012, 10:25 AM Reply Like
  • leokaplin
    , contributor
    Comments (202) | Send Message
     
    he is saying to sell CF or short it.. maybe not bad idea.
    18 Jul 2012, 11:14 AM Reply Like
  • MDHJr
    , contributor
    Comments (74) | Send Message
     
    Gartman misses the point. Fertilizer stocks are doing well because farmers will be loading up for next years crop at some point this fall....not this one. Pot has been on a tear and I 'm sticking with momentum!
    18 Jul 2012, 11:43 AM Reply Like
  • Topcat
    , contributor
    Comments (435) | Send Message
     
    yep, buy POT, set a trailing % STOP...
    18 Jul 2012, 12:43 PM Reply Like
  • digitalpbt
    , contributor
    Comment (1) | Send Message
     
    Gartman KING of MEDIA not COMMODITIES.
    18 Jul 2012, 11:47 AM Reply Like
  • Abigsoxfan
    , contributor
    Comments (610) | Send Message
     
    I bought MOS a couple of months ago at $47 then more at $46 not because the drought (it hadn't started yet) but because I felt inflation will be coming longer term due to all the Fed easing (and easing by most of the rest of the world's banks). Also, because those prices were near multi-year lows. The drought has helped it surge to over $58 and I'm hoping for it to return to multiyear highs. As populations grow and the world's middle class grows even faster, people will eat more, both vegetables and meat, requiring more farming and more fertilizer. I really don't care about the short term effects of the drought (other than it making my stock too expensive to buy more of). But will watch for the world's increased need for fertilizer.
    18 Jul 2012, 11:59 AM Reply Like
  • merrill spencer
    , contributor
    Comments (2) | Send Message
     
    I believe the failure of the corn crop is a direct result of the George Bush policies
    18 Jul 2012, 12:00 PM Reply Like
  • nelson3
    , contributor
    Comments (2) | Send Message
     
    High corn prices will encourage fertilizing even more for NEXT crop planting. Farmers have crop insurance in addition.
    18 Jul 2012, 12:02 PM Reply Like
  • nelson3
    , contributor
    Comments (2) | Send Message
     
    Evidently Gartner's is a comment from CNBC, not Seeking Alpha. Almost all fertilizer stocks are up today regardless.
    18 Jul 2012, 12:26 PM Reply Like
  • Bobco23
    , contributor
    Comments (182) | Send Message
     
    Nelson3 is right, Garthman is "just silly." He is no farmer. I am. Grain farmers have cash from the last few seasons. Most are volume hedged. They will come in with a big plant in the winter and early spring because prices are high and they can forward contract or hedge these high prices. A lot of fertilizer will be purchased with nitrogen highest on the list of need. MOS is ok and POT is ok, but the nitrogen play is CF, which I do not own. Equipment sales will not fare as well. DE is dead money for a while, IMO. Money will go into the next crop, not equipment. Garthman should know this by even casual observation.
    18 Jul 2012, 10:02 PM Reply Like
  • Slipkid1850
    , contributor
    Comments (28) | Send Message
     
    The price of fertilizer stocks are affected by more than just the corn yeild.
    19 Jul 2012, 01:18 PM Reply Like
  • Bobco23
    , contributor
    Comments (182) | Send Message
     
    OK. Apply the some comments to wheat and bean production. High prices always result in follow up huge plantings. What accompanies these plantings? Fertilizer. Especially nitrogen. Fertilizer prices are going up and so are fertilizer stocks. The major cost in fertilizer production is natural gas. It is not going to soar in the short term. This is the perfect storm for fertilizer stocks; high prices low input cost.

     

    Disclosure, fertilizer stocks conprise a bit over 1% of my portfolio. I will buy more on any significant dips.
    20 Jul 2012, 08:25 PM Reply Like
  • mrfisher111
    , contributor
    Comments (378) | Send Message
     
    fertilizer stocks will continue to rise since this drought is so bad. They need to be ready for new rain for whatever crops they have left. And since he posted to sell fertilizer stocks i kept buying. all of the fertilizer stocks have gone up over the last month.
    20 Aug 2012, 02:46 PM Reply Like
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