August 9, 2008

Declining corn prices relieve US livestock industry

The US livestock industry will be relieved as corn prices begin to fall following contract highs in June and early July amid crop concerns as a result of floods.

December 2008 corn futures have fallen to US$5.60 from a high of nearly US$8.

After reaching a high of nearly $8 per bushel, December 2008 corn futures are now trading around $5.60.

Corn prices have dropped due to several factors including lower oil prices, shrinking ethanol margins, slowing corn exports, growing wheat feeding and reductions in the swine herd. However, the biggest reasons are the improvement in crop conditions and an expectation of a larger crop. On July 27, 66 percent of the corn crop was rated in good or excellent condition compared to only 58 percent on the same date last year.

USDA's August Crop Production report will provide key information on planted corn and soy acres and an updated grain harvest forecast. However, such data are subject to revision as the growing season unfolds.