Record Corn Update

Every single time that I write a post about historic high corn, it seems to get even higher.   There are record flooding going on in the corn belt and we are at the tightest ending stocks in history.    The real question we have to ask now is how high is high?    We all assume that these levels cannot be for real and corn and food prices are setting back.    All I can say is that records are made to be broken.

The stage is set for some excitement as we run through these 500 year flood records and tight corn stocks.    Commodities are rolling and while they may end at some point, the trends are up now.    Picking tops are like catching a falling knife or a falling safe.   It can be done, but proves to be difficult.

What’s New On Sunday

Let me tell you briefly what I know since I have been up since 5:00 am MST. I found out the following:

1. Obama pulled ahead 1,617 to 1,498 over Clinton yesterday with a few more pledged delegates
2. Raincoaster got the big laugh for me with her tumblr blog entry:
   • Why are the links I put in days ago not showing up on Technorati?????? I claimed this fucking braindead excuse for a blog already! - Source
3. If TechCrunch is even close to right we will be seeing Flickr Video here right away. Then the decision to keep YouTube or head over to Flickr begins
4. I have tried out FriendFeed now and it is pretty neat. It combines all things from all friends. It is just another step in aggregation of things. Hat Tip to Chris for the link to check it out!
5. It is called that the US should drop their fed rate another 75 bps next week even though Bush thinks that is would be a problem
6. Hoping I would be, but no further ahead on my domain problems
7. Really starting to enjoy twitter more. That is pretty fun!

Just some interesting things I have been wasting the past couple of hours with.

What’s New On Sunday

Let me tell you briefly what I know since I have been up since 5:00 am MST.    I found out the following:

1. Obama pulled ahead 1,617 to 1,498 over Clinton yesterday with a few more pledged delegates
2. Raincoaster got the big laugh for me with her tumblr blog entry:
   • Why are the links I put in days ago not showing up on Technorati?????? I claimed this fucking braindead excuse for a blog already! - Source
3. If TechCrunch is even close to right we will be seeing Flickr Video here right away.  Then the decision to keep YouTube or head over to Flickr begins
4. I have tried out FriendFeed now and it is pretty neat.    It combines all things from all friends.   It is just another step in aggregation of things.  Hat Tip to Chris for the link to check it out!
5. It is called that the US should drop their fed rate another  75 bps next week even though Bush thinks that is would be a problem
6. Hoping I would be, but no further ahead on my domain problems
7. Really starting to enjoy twitter more.    That is pretty fun!

Just some interesting things I have been wasting the past couple of hours with.

JBS The Biggest Packer/Feeder

In a dramatic chain of events, JBS purchased both National and Smithfield Beef today.   With this purchase they also picked up 5 River Cattle Company with a one-time feeding capacity of 800,000 on feed!   If this one is approved by the Justice Department, they will become the largest packing/feeder company in the USA.   The following is from the CME Group’s Daily Livestock Report:

The long-rumored purchase of National Beef by JBS-Swift finally became official this afternoon.
Perhaps the bigger story, though, is the published report from the Greeley Tribune that JBS-Swift will announce on Wednesday that they have also bought Smithfield Beef and Five Rivers Cattle Company, the joint venture with Continental that is the largest cattle feeding operation (with a one-time capacity of roughly 800,000 head) in the U.S.

The Tribune cited Steve Kay of Cattle Buyers’ Weekly as its source on the Smithfield-Five Rivers story. We have confirmed it through two other sources that we believe to be very dependable.  If all three acquisitions are consummated and approved by the Department of Justice, JBS-Swift will be the largest cattle feeder and cattle slaughterer in the U.S.  Who would have thought that possible just a couple of years ago?

U.S. Premium Beef, a cooperative of beef cattle feeders that owned a majority interest in National Beef made the announcement regarding the National acquisition this afternoon.  The price is $465 million in cash, $95 million in JBS stock and the assumption of National’s debt.  It includes operations in Kansas, California, Pennsylvania, and Georgia as well as National Carriers, Inc. and Kansas City Steak Company, LLC.

I realize that this was a big night for the Clinton camp, but for those of us in the livestock industry, this is just about as important.    Just this past year, JBS (Brazilian company) purchased Swift and really has been a major player in the push for market share from both Tyson Fresh Foods and Cargil.   This should be interesting how the market absorbs this information.

Corn Moving, But Where?

If you are in the business, it has become a new reality that corn and other grains are on the move upwards. We saw the fall of 2006 take corn upwards when it seasonally would go down. That led to few people buying corn expecting it to go lower. Once it was at levels not seen since 1996, several people bought corn only to see it go down until the fall of 2007. It stayed low on the harvest crop and has been having upward pressure since.

With a previous 25 bear market in grains, few believes this bull market is for real since in the past a big crop would take care of the higher prices with supply. This bull is different though. It is “common knowledge” now with ethanol that there is upwards pressure on grains. That, is not the entire story though. In fact, I think the other story is larger.

Ending stocks in grains are at some historically low levels even with the increase in technology and yields. China and India are two nations that are hitting “middle class status” in record numbers and increasing the demand for feed grains as they change their diets. The world is looking at a “demand” shift versus a typical one-sided “supply” market. This is the tough part about reading grain and other commodity markets.

So where is grain going from here? Not a person on earth can answer that with high levels of certainty because it is too tough to call with too many factors in play. The supply is low even with record crops and yields. World demand is increasing. Inflation and potential for an economic slowdown worldwide are factors. The “credit crunch” worldwide is still in the works with Citibank and Meryl Lynch writing off an additional 30+ billion in the past couple of days. Uncertain weather conditions and higher energy costs. The list goes on and on. I get a kick out of the following conversation I had not long ago.

“There was a storm in the Barring Sea that caused feeder cattle to go down.”

“Sorry…..what do you mean?”

“The storm caused the refineries to go offline. Oil went up which caused gasoline to go up. That in turn took ethanol higher. Then the grain traders got on board and took corn higher. The potential cost of gains then scared off the feeder cattle traders and they took it down. Don’t you know anything? ! ! !”

It sounds like a joke doesn’t it! Or is it?

-30- For Michael Levy

I was really saddened when I recieved my World Market Update this morning and found that Michael L. Levy, a financial and market analyst that I greatly admire, is calling an end to his career after 40 years in the business.   Micheal Levy, is currently the Executive Vice President & Financial Analyst for Custom House which is a world leader in currency exchange, amongst other things.   From Michael’s final comments:

-30- The end of a story

In days past, before internet and other instant communication devices, reporters or columnists filing stories by wire service would use the figure -30- to denote the end of the story so editors would know that they had the complete filing.

-30- among older reporters and columnists also began to be known in those days as the end of an era, an end of a career as they signed off for the last time.  Today we say -30- to our career which spans over 40 years in this and related businesses and write for the last time in this our final go at the World Market Update.

I have seen Mr. Levy speak 5 times in person and listen to him most Saturday mornings on “Money Talks” on QR77, a syndicated financial show broadcast nationally.   Friends with the likes of Dennis Gartmen and other greats like James Dines, Levy’s comments were always entertaining and on point.   He called the dollar hitting par when it was just an infant in the high 70’s.

The update that I read each morning served as an important snapshot of what is going on in the macroeconomic part of the world that directly influences my decisions each day and will be greatly missed.   I hope that another budding career analyst will take Mr. Levy’s spot.

I doubt you will ever read this Mr. Levy, but you will be greatly missed by me.   I wish you all the success in your retirement sir.

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