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commodity corn prices

Article Index

Watch for Record Rain-Driven Corn Prices

By , Behavioral Trading Specialist, Money Morning -

Last year's crippling drought has led to a spike in global corn prices and tightened available supply stocks, as U.S. farmers experienced staggering crop destruction from the sweltering heat.

But this year, Mother Nature seems to be making up for lost time.

Farmers have been inundated with so much rain in the planting season months that just 54% of the Iowa corn crop is rated good or excellent as of last week. The 10-year average of the state crop is 74%, which is raising concerns given that the planting season recently ended.

Nationally conditions are improving following a recent rush by farmers to complete corn planting to beat crop insurance deadlines. As of last week, 65% of the U.S. corn crop is currently rated in good or excellent condition, down 3% from the 10-year average.

Ongoing storms across the Northern Corn Belt have made it increasingly difficult for farmers to get seeds into the ground. The slower-than-normal pace of plantings has fueled concerns that U.S farmers would plant less corn than earlier USDA estimates, reducing the size of this year's crop.

Now, with more unpredictable weather on the horizon, all eyes look to Friday with big announcements by the USDA on planted acreage and the quarterly figures for corn stocks.

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Higher Corn Market Prices Will Hit Your Wallet

By , Associate Editor, Money Morning • @DavidGZeiler -

A smaller-than-expected U.S. fall harvest, combined with strong demand, has sown the seeds of higher corn market prices. That will inflate your grocery bill, but it's also an investing opportunity that should persist into next year according to some experts.

The United States Department of Agriculture (USDA) recently reduced its forecast for the fall corn crop to 12.9 billion bushels from 13.5 billion based on damage from spring flooding and summer drought in several key corn-producing states.

Midwest temperatures averaged eight degrees higher than normal in July, while some areas got less than a third of their normal rainfall.

"Corn is dead on some of the sandiest ground and looks more like the middle of October than mid-August. The corn crop is pretty much a done deal," Mike Mawdsley of broker Market 1 told Agrimoney.com.

In addition to lowering its estimate for the fall harvest, the USDA has also lowered its quality rating of the U.S. corn crop. The USDA had rated 70% of the corn crop "good to excellent" as of June 26; that number fell to 60% on Aug. 14 and was revised down to 57% on Monday. Last year, 70% of the corn crop was rated good to excellent.

Many experts believe the USDA has only just begun to downgrade.

"The USDA crop forecast should ...still prove too optimistic, despite the downward revision already made in August,"Commerzbank analysts said.

Another group, MDA Information Systems Inc., has already undercut the USDA's harvest estimate. MDA forecasts a corn crop of just 12.23 billion bushels.

Price Pressure

The ever-worsening harvest forecasts have steadily pushed corn market prices higher.

The price of corn has soared 70% in the past 12 months, with futures for September and December delivery well north of $7 a bushel. September futures on the Chicago Board of Trade (CBOT) rose to $7.29 on Tuesday, while December futures rose to $7.42.

That's bad for consumers. Corn is the single-biggest cause of increases in food prices, which are expected to rise 4% for 2011. Analysts expect higher corn market prices to help push retail food prices up another 4% next year.



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