A monthly USDA Crop Production report released Friday morning showed a decrease in predicted corn yields. This pushed corn prices to a new 20-month high on Friday, with December corn trading up to $4.79 per bushel. The USDA report projected that the corn carryover (the amount leftover before next year's harvest) will be extremely tight. The USDA projects that we will have only 8.3% of one year's use in excess, the second smallest carryover in nearly 40 years.
The tight supply situation has been developing this year as Asian consumers hoard grain to feed to livestock while U.S. ethanol production has continued expanding. Over the last four months, corn prices have gained $1.40 per bushel, up 43%.
Hurricane Igor Threatens Florida's Oranges
Storm watchers were closely tracking Hurricane Igor this week as it tracked towards Florida. Traders worried that the storm could damage Florida's orange crop, the second-largest in the world. Storm fears pushed orange juice prices sharply higher, with frozen concentrated orange juice prices jumping 10 cents to $1.46 per pound on Friday (+7%).
Friday marked the average peak of the hurricane season, although storms frequently continue through November. In addition to the impact on tropical food production, traders often watch tropical storms for their impact on energy and lumber markets. Large storms can interrupt drilling and shipping in the Gulf of Mexico, halting crude oil and natural gas production, while on-shore refineries can be shut down by major hurricanes, preventing the production of diesel fuel, heating oil and gasoline.
In the aftermath of major storms, damaged homes need to be repaired, causing an increase in demand for lumber. With all of these impacts in mind, traders and end-users need to be especially cautious during storm season, as prices can change as quickly as the weather.