August 13, 2007

Analyst expects US corn price hike in 2008/09

Banc of America Securities analyst Eric K. Brown anticipates significantly higher corn prices in 2008 and 2009 due to higher ethanol capacity. Specifically, Brown forecast corn prices of US$3.49 per bushel in 2008 and 2009, versus US$3 per bushel in 2007 and 2008.

Demand for corn has risen dramatically this year amid growth in the ethanol industry, causing farmers to switch more of their land to corn planting to capture high prices.

Brown said a rise in corn prices would be good news for seed and crop protection chemical producers, such as Monsanto, DuPont, and American Vanguard Corporation because more farmers will want to protect their crops, specifically noting increased use of herbicides, insecticides and fungicides

In the near-term, however, Brown said there may be downside to the Agriculture Department's 2007/2008 forecast of US$2.80 to US$3.40 per bushel, but said that would benefit some companies like VeraSun Energy Corp., which has an unhedged position on corn.