With the connection of grain prices and ethanol - not oil linked - I saw this article and wondered what others thought?
Bearish On Oil -- Bearish On Corn Prices
The recent spike in corn prices may soon turn into a slump, says Michael Swanson, Wells Fargo & Co. economist. He expects oil prices to decline by $5-10/barrel during the next 12-18 months and ethanol profitability and expansion along with it.
"To know the ethanol price, you need to know the price of gas," he says. "Right now, wholesale nearby reformulated blend stock gasoline is selling at $1.20-1.30/gal. The blending credit for blending in ethanol is 51¢/gal, so the nearby wholesale ethanol price is selling at $1.71-1.81."
The net margin on $1.70/gal. ethanol is very small with $4/bu. corn, emphasizes Swanson. In fact, it's not sustainable for long. He's cautioning U.S. farmers about switching too many acres to corn in 2007.
"If we switch a lot of acres into corn, the price of soybeans will go up, and if soybean prices go up to $8-9/bu., Brazilian farmers will be planting a lot more soybeans, and Brazilians can add a lot more soybean acres than we can," he says.
Barring any bad weather news in major crop growing areas, however, Swanson says $4/bu. corn won't likely hold for long.
Here's a look back at average U.S. corn prices per month since 1996: www.nass.usda.gov/Charts_and_Maps.
Although there is a gap in USDA corn price data from 1970-1996, the USDA data on average U.S. corn prices from 1910-1970 is extensive. Here it is:
www.nass.usda.gov/Statistics_by_State.pdf.
Bearish On Oil -- Bearish On Corn Prices
The recent spike in corn prices may soon turn into a slump, says Michael Swanson, Wells Fargo & Co. economist. He expects oil prices to decline by $5-10/barrel during the next 12-18 months and ethanol profitability and expansion along with it.
"To know the ethanol price, you need to know the price of gas," he says. "Right now, wholesale nearby reformulated blend stock gasoline is selling at $1.20-1.30/gal. The blending credit for blending in ethanol is 51¢/gal, so the nearby wholesale ethanol price is selling at $1.71-1.81."
The net margin on $1.70/gal. ethanol is very small with $4/bu. corn, emphasizes Swanson. In fact, it's not sustainable for long. He's cautioning U.S. farmers about switching too many acres to corn in 2007.
"If we switch a lot of acres into corn, the price of soybeans will go up, and if soybean prices go up to $8-9/bu., Brazilian farmers will be planting a lot more soybeans, and Brazilians can add a lot more soybean acres than we can," he says.
Barring any bad weather news in major crop growing areas, however, Swanson says $4/bu. corn won't likely hold for long.
Here's a look back at average U.S. corn prices per month since 1996: www.nass.usda.gov/Charts_and_Maps.
Although there is a gap in USDA corn price data from 1970-1996, the USDA data on average U.S. corn prices from 1910-1970 is extensive. Here it is:
www.nass.usda.gov/Statistics_by_State.pdf.
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