September Corn Futures Up on Perceived Demand

Several factors have been moving the price of grains lately, not the least of which has been dry and hot weather in the western and eastern portions of the Midwest in the United States. That has resulted in corn prices going higher, as uncertainty concerning the needed rain and if it'll come remains.

But corn has been unwound some from its grain cousins, with the ethanol factor being always in play, as well as the growing demand from China. Both of these are been increasing in 2010.

Recent data from the USDA shows there was less corn acreage planted than originally estimated, and production estimates were also lowered on July 9 by almost 1 percent, to 13,245 billion bushels. The corn production estimate cut came from the corn acreage report.

Even so, we're still on a production course to reach record highs this year, which means there is a lot of optimism concerning surging demand.

Another factor on the negative side, as far as corn prices go, is the possibility of cutting the ethanol subsidy program, which has increasingly come under fire for its costs and controversy over damage to power equipment and some cars, as well as the environment.

The budget crisis and outrageous spending of the Obama administration has led us to that place.

There is mounting pressure to eliminate the ethanol tax subsidies, and even proponents are talking of cutting it by 9 cents from the current 45 cents a gallon, to possibly 36 cents a gallon for the subsidy.

Corn Futures Down on Dollar, Inventory

Corn Futures, Dollar, Corn Inventory

Corn futures dropped again as the stronger U.S. dollar made investments and exports unattractive, and the significant global corn inventory has left no base to work from.

As with wheat, as mentioned in my last post, when the prices of grains surged in 2008, farmers seeded huge amounts of wheat, corn, soybeans and rice, which all but assured there would be downward pressure on grain prices in the years ahead.

I'm not sure why the farmers continue to do this, or if they're being told wrongly, but farmers need to understand that if they put huge seedings of crops in the year after a big price increase, they can be sure huge numbers of farmers around the world will do the same.

While there is always the possibility of weather having a devastating impact on some crops, as last year showed, there was so much grain on the market that even when their were droughts or other weather problems, there was so much available it didn't have much of an impact.

With corn this is the story, and will continue to be a bearish story until some farmers drop planting it based on past performance.

Eventually there will be major demand around the world for food, but we are far from that with grains at this time, even though analysts and wealthy investors like Jim Rogers tout food and agriculture in general as a great future investment.

It will be all of that, but when farmers plant far more than global demand warrants, we're always going see downward pressure on corn futures and other grains until it corrects itself.

Corn Futures, Dollar, Corn Inventory

Corn Prices Rise on Weather

Corn Prices 2010

Although it's only speculation at this time, corn prices surged on the possibility melting show in the mid-west will result in flooding, which will in turn cause a smaller planting of corn by farmers in the spring.

A smaller planting of course will end up with a smaller yield of corn.

Even so, estimates from the USDA have corn acreage to be planted this year at some 89 million, up from the 86.5 million acres in 2009.

With weather expected to be at very cold levels in the region for the next three weeks, along with a potential 6 inches of water inherent in the snow laying on the ground of the great plains and the mid-west, that will put back the normal time of the spring thaw, making it harder to plant as well as harvest corn.

Taking that all into consideration, the question is whether the additional corn acreage planted in 2010 will make up for the late season and possible crop shortage in some areas.

Corn Prices 2010

Commodities: Bunge Ltd Drops Bid

Bunge Ltd drops bid for commodity company Corn Products International

Just a few days after the board of Corn Products International (CPO) withdrew its support to be acquired by Bunge Ltd. (BG), the board of Bunge decided to end their pursuit of the deal.

With the shares of both companies dropping significantly, especially Bunge's, the deal no longer was as attractive as when the offer was originally made.

Per the agreement, Corn Products will now have to pay $10 million to Bunge because of the failure of the deal to go forward.

Corn Products was desirable to Bunge because they were looking to become a key player in finished corn products. Bunge is primarily a food processor.

In the case of this deal, the weak credit market didn't play any part, as it was based totally on using stock. It was the precipitous drop of Bunge's stock which caused Corn Products board members to withdraw support.

Bunge Chairman and CEO Alberto Weisser said the deal no longer made sense to Bunge and its shareholders without the support of the Corn Products board, and while the commodity price couldn't support the deal.