"“We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” "

Chinese premier Wen Jiabao 12th March 2009

""We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system."

Timothy Geithner US Secretary of the Treasury, previously President of the Federal Reserve Bank of New York.1/3/2009

Tuesday, June 24, 2008

Mid West Floods, hits corn harvest, high corn prices hit ethanol producers , good times for Gulf fertiliser plants and GMO seed supplies

These NOAA maps clearly show how the Mid West has had a double whammy with the worst storms and flooding since '93 . This has hit sowing and early growing of corn and soya. This will undoubtedly result in lower yields plus the threat of fungal crop infections and the latest (June17th) USDA Crop Bulletin is a tale of record breaking rainstorms, the worst since 1943. For example Milwaukee with 10.96 inches has broken June records and also their wettest month of the year ever. Corn and Soya have seen 85-95% plantings completed but crop conditions have declined (USDA inspectors reports) from 60% to a recorded 57%.

Therefore projected crop estimates from earlier in the year could end up being 20-30% too high. In early May after reporting lower corn plantings, USDA projected this years crop 12.1billion bushels, down 7 % from the record 2007/08 crop. . They also anticipated (World Agricultural Supply and Demand Estimates) that next year's corn stocks will drop 45% to to 763 million bushels, the lowest since 1996.

The result is corn price have gone crazy and closed on Chicago Board of Trade yesterday for July @ US$ 7.2425 a bushel (US$2 2 years ago) and says Toni Fabuloso have a way to go yet . Corn for ethanol use was forecast to rise from 3 billion bushels of corn in crop year 2007-2008 to 4 billion bushels in 2008-2009, say at most 5% of the total crop.

Higher rains means higher run-off and associated nitrogen depletion, crops will need extra late season fertiliser application to try and boost yields - the most common source is urea based from Natural Gas and we wrote previously - Wednesday, June 20, 2007
US swapping oil security for fertiliser insecurity and higher farm and food costs how US suppliers based on natural gas had closed down. Now throwing food security to the winds the US relies on urea based fertilisers from Midlle East suppliers such as Sabic with a huge production complex at Al Jubail in Saudi Arabia and QAFCO founded in 1969 and owned by the State of Qatar. CF Industries are the biggest producer left in the US. Their shares IPO'd in Mid 2005 168.35 closed up US$1.60 (1%) yesterday , with a Dividend yield of 0.4% on EPS US$8.41.

All these extra production costs, plus trucking cost will eventually hit protein supplies at retail levels , Hogs, beef, milk, eggs, poultry and the Thanksgiving Turkey. The impact on ethanol production cost and prices has been even faster ;

Already having a bad time ,the US ethanol producers have announced further cuts in production and plants being shuttered. VeraSun Energy Corp announced on Monday that two plants slated to produce 110 million gallons per year, being built on Welcome, Minnesota, and Hartley, Iowa due to open now, will not start up. Spokesman Michael Lockrem said record corn prices and comparatively low ethanol prices, made life difficult but claimed that the decision had nothing to do with floods ravaging corn crops across the Midwest.

Vera Sun expect three other newly built ethanol distilleries to open by the end of this year in Iowa, Minnesota and North Dakota. (VSE closed down 67 cents down 13.5 % yesterday at US$ 4.37)

The Financial Times reported plant closures on June 15th and quoted reports that output could be cut by 2bn-5bn gallons of ethanol.

Iowa Renewable Fuels Association issued a report on the impact of the floods on June 18th estimating that over 300 million gallons (annualized - total annual production 2.2 Bn Gallons) which means about 15% of capacity is idled.

Iowa Farm Bureau estimates the loss of 1.3 million acres of corn will be lost in Iowa. Illinois, Wisconsin, and Missouri, are expected to show a further 2-3 Mn acres . This suggests 2008 productive corn plantings are likely to be in the 83 to 84 million acre range compared with earlier USDA estimates of 86,014 cares (which was a drop of 18% on last year).

In the last major floods, in 1993 both the Missouri River and Mississippi River Basins were badly affected - economic damage in Iowa, North and South Dakota, Nebraska, Kansas, Minnesota, Missouri, Wisconsin and Illinois was said then to be US$20 billion.

This year flooding in the Missouri River Basin is limited but Iowa report worse flood damage to Iowa's bridges, highways, roads and railroad tracks than 1993. Dena M. Gray-Fisher, spokeswoman for the Iowa Department of Transportation said water levels in Iowa exceeded 1993 levels. "That , and the force of the water ... This one is so different in how much area is covered, the amount of devastation, the amount of water. It just didn't stop for a long time."

After the '93 foods the farmers bounced back - in 1994 a record crop of 10 million bushels with a record yield of 138.6 bushels per acre was produced on 8% more plantings. This year the yield is expected by USDA in early year (May) reports 153.9 bushels per acre, 1 bushel down on a 17 year continuous upward trend.. and of course that relates to the Monsanto GMO varieties that have seen a huge rise in yields....and the Monsanto share price ..

It should be a good time for farmers to spend at case and John Deere tractors and maybe an outsize ouside hot tub at the Indiana State Fair and join in Garfield's Official 30th Birthday (officially that was on June 19th) - Paws Inc. Jim Davis's company oversees over the annual sales of US$1 Bn of merchandise for the the slothful ginger cat whose undertall for his weight .

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