January 3, 2007

US corn futures may reach 10-year high, say analysts

Growing interest in biofuels might push corn futures in Chicago to their highest levels in 10 years, analysts said.

Further, soybeans would also make big gains.

Corn futures climbed 81 percent last year while soybeans rose almost 14 percent as the world increased its interest in biofuels like ethanol. US corn futures traded in Chicago rose to 10-year highs in November and continued to rise further, primarily due to the expansion of ethanol in the US.

Corn-based ethanol production in the US doubled between 2001 and 2005, and could do so again the next few years. The country already has 100 active ethanol plants capable of producing more than 5 billion gallons of ethanol a year. Another 150 ethanol plants have been proposed around the country.

This could further drive corn prices, said Jerry Gidel, an analyst.

Soybeans too hit a 17-month high of US$ 6.97 per bushel.

In a survey conducted by Bloomberg, 20 out of 26 traders recommended buying into both commodities.