Corn Prices Surge Amid Growing Fears of Another Food Crisis

Posted Oct 12th 2010 10:00AM by Connie Madon
Filed under: International Markets, Commodities, Agriculture

corn prices Corn futures continued their spectacular rally. In the past four days, December corn futures have risen from $4.88 to $5.44 per bushel (each penny equals $50).

Even though we have a good corn crop this year, the situation next year will be much worse. The U.S. government said that leftover supplies will fall to a 15-year low, as reported in the Financial Times.

From 2007 to 2008, grain prices shot up to all-time highs when talk of a worldwide food crisis occurred. Now again, the same dynamics are beginning to formulate.

Fund managers are moving heavily on the buy side. For every seller, there are 31 buyers, setting a record, according to the Commodity Futures Trading Commission. The weak U.S. dollar is making corn more attractive to importers, according to Luke Chandler, grain analyst at Rabobank in London.

Corn is used as a food staple and for animal feed. This unusual blend makes corn one of the most valuable food commodities worldwide. In addition, 35% of U.S. corn production is used to make ethanol, a gasoline additive. The U.S. is the world's largest corn exporter. Any hint of supply shortages in the U.S. sparks higher prices around the globe.

Tags: corn, ethanol, inthenews