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November 9, 2011

 

US to have smallest corn harvest in three years

 

 

The US is projected to have its smallest corn yield in three years, according to the USDA.

 

Drought has damaged much of the corn crops of US this year. This is expected to further increase the prices of corn which are already at record levels due to increased demand from China.

 

Corn has outperformed the GSCI Agricultural Index this year. Corn prices have gained 4% year-to-date on CBOT this year and were last trading at US$6.5425 per bushel. The eight commodity GSCI Agricultural index, of which corn is a constituent, declined by more than 13% this year.

 

Corn prices are already under a lot of upward pressure as China is importing record levels of corn this year. China is the largest importer of US corn. Corn is mainly used as livestock feed and in ethanol, starch and sweeteners. The future gains in corn prices can be curbed if livestock farmers choose to use more of wheat in the livestock feed. Contrary to the rise in corn prices, the price of wheat has slumped by 19% this year and has come down to US$6.4025 per bushel.

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