Corn prices popped to new all-time highs this week as the USDA lowered its forecast for this fall's harvest by 2.3 percent. Flooding on the Ohio, Mississippi and Missouri Rivers was the primary culprit, responsible for wiping out nearly 2 million acres of land that farmers had hoped to devote to corn.
U.S. corn stockpiles are expected to hit a 15-year low this fall, as demand from livestock feeders, ethanol producers, and exporters has been much stronger than expected. The USDA is currently projecting that the U.S. may have as little as 19 days' use of corn available before the next harvest.
Despite the fact that this fall's harvest could still be the largest on record, the USDA projects that demand next year will continue to outpace production, making an even tighter corn market in 2012.
With this most recent influx of bullish news, corn has rallied 42 cents per bushel over the last week (+6 percent). As of Friday morning, corn for July delivery was trading at $7.96.
Storm season begins
The National Oceanic and Atmospheric Administration (NOAA) has projected that this year's hurricane season would be more active than usual. Although the peak of hurricane season doesn't hit until September, traders have begun watching early storms and their impact on the energy markets. The National Hurricane Center is currently tracking a tropical depression that is over Cuba, with the potential to develop into a larger storm and hit Florida.
The Gulf of Mexico is a major source of U.S. natural gas and crude oil production and is also home to numerous refineries that convert crude oil into gasoline, diesel fuel and jet fuel. As such, major hurricanes can disrupt production or refining, sometimes pushing prices sharply higher.
Other tropical markets, like orange juice, cocoa, and coffee can be affected by hurricanes, as large storms can destroy plants and disrupt exports. Much of the world's orange, coffee and cocoa production is clustered around the Gulf of Mexico, where storms frequently hit.
As of midday Friday, crude oil for July delivery was trading at $99.50 per barrel, July natural gas was worth $4.72, and July coffee was at $2.62 per pound.
Opinions are solely the writer's. Alex Breitinger is commodities broker with Breitinger & Sons LLC, a commodity futures brokerage firm in Valparaiso, IN. He can be reached at (800) 411-3888 or indianafutures.com. This is not a solicitation of any order to buy or sell any market.