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Enterprise Products Partners L.P. Message Board

gotcha1942 3 posts  |  Last Activity: Sep 14, 2014 12:37 PM Member since: Jun 13, 2008
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  • gotcha1942 gotcha1942 Sep 14, 2014 12:37 PM Flag

    dstone - when there's a sharp variation relative to trend yield the price reacts because the market generally expects trend yields. You'll notice that in years of poor yields prices spike in the summer; much better than expected yields, as we have this year, prices plummet, all else being equal.

    My perspective is based upon over 20 years an a grains analyst. I'm not saying corn will be down forever, but with farmers having sold so little forward, in order for the market to earn it's carry (ie, spot prices rise), there must be some evidence the carryout will be diminished in the future. Perhaps the southern hemisphere will have a drought which means US exports will be much bigger than expected in the second half. But if not, corn will languish until next crop year becomes the focus. For the time being, I'd much rather be a seller of longer dated out of the money puts than being long corn.

  • gotcha1942 gotcha1942 Sep 12, 2014 12:52 AM Flag

    The crop is only 3% higher than last year, but the yield is a record and significantly above trendline. See link to see why I'm saying you're wrong to say there's a "finite amount" of grain that can be produced per acre.
    http://www.nass.usda.gov/Charts_and_Maps/Field_Crops/cornyld.asp

  • gotcha1942 gotcha1942 Sep 11, 2014 2:55 PM Flag

    Dstone - that's not true that there's a "finite amount of corn, wheat or soybeans" that can be produced per acre. In corn especially there's a strong uptrend in historical yields due to technology and changes in farming practices. Often the market doesn't appreciate in advance what is possible under good conditions as a result of changes in seed technology or other factors. Big crops often get bigger and since the bulk of harvest is ahead there's no reason to pick a bottom. Historically, if corn bottoms in the fall it's often when the crop is around 2/3 harvested. Given that this year farmers have not sold much in advance, ie hedged their production, prices could languish for a very long time since every pop up farmers will be selling. I would not be a buyer yet.

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