Something very important is about to happen here: corn, sugar, ethanol, and Brazil
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This is not a table bang.
It's like watching a traffic accident in slow motion, and knowing you're going to be saying "I should have seen it coming" in a few minutes.
Corn acres planted were way down this year.
The weather sucks - drought persists in the southeast, and plantings are delayed in the north. Maybe the weather will straighten out, maybe it won't. It is too early yet to pronounce the 2008 corn crop dead on arrival - but it is definitely time to have a game plan for that eventuality.
Normally we see the weather pattern reflected in commodity prices, but corn futures are being pulled down by anti-ethanol talk. Re-examine all thinking based on corn prices. Consider that there is a very strong foundation price for corn at this time, that will not evaporate at least until elections.
There is a lot of talk about hog and beef farmers going out of business because of high prices of feed grains, mostly corn. Somehow we don't see it in the prices of these meat commodity futures, yet, and that confuses me.
Politicians are talking about cutting gas taxes, and it is a matter of seconds before one-upmanship starts over WHICH tax / subsidy / tariff is the smartest one to cut - and whose tax cut is BIGGEST.
Politicians are lining up - their words, and their dollars - and connected investors too, to cash in on offshore ethanol. Why would not the USA get its ethanol from offshore?? We get everything else, and Brazil is as politically aligned to the USA as we can hope for, in any energy-rich country.
Tensions in the middle east are not decreasing. Brazil is a favorable energy partner, for petroleum or ethanol; politically a huge counterweight against Chavez.
Lots of factors portend rising oil prices (won't go into detail here, but also note a number of experts also predict falling oil prices).
~70% of the world's sugar demand is behind tariff supports. One way for sugar to trade past these walls is to take down the walls - by legislation. Another way is for sugar to flow over them, by rising above the supported prices. World price for sugar is about 50% that of USA supported price, and sugar has so far lagged rice, wheat, corn, soybeans - so it's very conceivable that sugar could overflow the tariffs.
It is not a sure thing, but it's likely that we will see the American door open to Brazilian sugar and/or ethanol, before the end of 2008. CZZ would be the purchase.
When does it change from a "maybe" to a "table pounding highly likely"? - If and when the corn harvest in the USA starts to look really pekid - depending on sustained drought in the SE and most of all, continued wet weather in the corn belt. We rely on our farming specialists here (Mom, Peace) to keep us informed on that. My take so far is that the odds are something like 3 to 1 against the 2008 corn harvest being a bust. CZZ is still a reasonable purchase, just not a barn-burner if the corn harvest doesn't wiff.
This is not a table bang. But I do have my fist up in the air.
Trivia:
Brazil exports sugar to Cuba. |
