Corn prices made a record high this year as drought ravaged crops across the Midwest. Despite the fact that farmers planted the most acres of corn since 1937, this year’s corn crop was relatively small due to drought-induced low yields. As corn baked throughout late summer, market expectations of a dangerously small crop pushed prices to a record-breaking $8.43 per bushel.
Since late summer, good weather through harvest reduced fears of shortages, while still-high corn prices turned off many would-be buyers, decreasing demand. Furthermore, South American farmers will be harvesting their corn crop soon, increasing global supplies. As a result of a less-tight corn market, prices have dropped precipitously over the last four months, falling $1.50 per bushel (down 18 percent).
Despite the sharp sell-off, corn prices are still at historically high levels. Trading Friday at $6.90 per bushel, corn is more than triple the price from 10 years ago. Most analysts do not expect corn to return to the early 2000’s lows of less than $2 per bushel, unless there is a drastic change in U.S. ethanol policy or global meat consumption, the two major sources of demand for corn worldwide.
Opinions are solely the writer's. Walt Breitinger is the president of Breitinger & Sons LLC, a commodity futures brokerage firm in Valparaiso. He can be reached at (800) 411-3888 or indianafutures.com. This is not a solicitation of any order to buy or sell, nor does it provide any recommendations regarding the market.