Where there is smoke, there is likely to be a fire, and while we have not actually witnessed the flame just yet, the smoke continues to intensify. Overnight news reports that over the past month, China has purchased at least 10 to 12 cargoes of corn and the belief is that it will not end there. It would seem that one of the key impetuses of this is that imported corn is less expensive, around 300 yuan, than domestic corn but of course as we have discussed previously, quality of existing stocks most likely also factors into the picture. Keep in mind that China is already the second largest corn user on the globe and with the government already “encouraging” farmers to plant fewer acres and the expansion of ethanol production and what should be a rebuilding in hog herds, they will already be looking at a deficit situation this coming year. Several private analysts already predict that China will import between 5 and 5.5 MMT of corn this year which compares with the current USDA estimate of 3 MMT. While these stories have yet to provide any buying enthusiasm for our corn market, it should provide a very solid base of support.
The Office of the Chief Economist of the USDA released preliminary projections for 2018/19 acreage yesterday and projected another new record to be set for soybeans and an overall increase for all crops. They currently project that beans plantings will rise of 91 million acres, up for 90.2 this past year and corn will rebound as well, also pegged at 91 million which would be up 600,000 from last year. Total acreage for the eight major crops was pegged at 253.7 million acres, which would be an increase of 1.4 million over last year. Do note that total wheat acreage is projected to come in at 45 million acres; the lowest planted acreage since 1919. As I commented, these are preliminary, and the “official” projections will be released in February.
Not that it is impacting many of us directly, at least not yet, I have to throw in a comment this morning about the red-hot Bitcoin market. I have asked aloud several times over the past couple years about how long it might be before we are pricing our commodities in Bitcoin or other cryptocurrencies and while that remains to be discovered, we can certainly say that any of us would have enjoyed being long in the market for the past year. Yesterday, Bitcoin pushed above $10,000 ($10,930 to be exact) before falling back below that mark, which is more than a ten-fold advance just this calendar year. This market has all the characteristics of a classic bubble and somewhat reminds me of the frenzy in gold back in the late 1970’s, but that certainly has not discouraged buyers from racing in. Never doubt the excitement many investors get from running with scissors. A month ago, the Chicago Mercantile Exchange announced plans for introducing a Bitcoin contract during the fourth quarter of this year and it makes one wonder if that timing of such a contract may not coincide with the blow off. Stay tuned.
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