October 14, 2008

  

Plummeting corn futures might lead to a slide in prices

   

  

In July, corn futures at CBOT nearly hit US$8 per bushel, but have now dropped to almost US$4, a sharp drop of 30 percent in the last two weeks.

 

December contracts settled around US$4.27 last week. Cash prices in the US average around US$3.74 for corn and agronomists calculate the break-even price at US$3.40.

 

The low prices will be problem for producers if they continue into next year, when the break-even price would likely be above US$4, which varies in different parts of the US depending on yield potential, according to analysts.

 

The current price drop is largely caused by extremely high fertiliser costs rather than low corn prices which might prevent expansion of corn plantings, but farmers remain optimistic and will continue to plant their crops.

 

In the past, corn prices were low enough that producers knew there would be government assistance. The USDA said that the government price for corn is currently at US$1.95 per bushel.

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