Corn prices had their biggest one-day drop in history on Thursday, falling as much as 82 cents per bushel (-11.7 percent). Only two weeks ago, corn prices had made a record high at $7.99 per bushel, but increased farmer planting, better growing weather, and decreased demand worked in unison to cut the legs out from under the corn.
On Thursday morning, the USDA released a report showing the current amount of grain in storage and tallying crop acreage planted. Both figures showed significantly more corn than had been expected. The USDA reported that farmers planted 1.5 million acres of corn more than expected (+1.7 percent), while corn stockpiles were 368 million bushels above expectations (+11 percent). Increased acreage and decreased usage of corn sent the market into a tailspin, pushing prices as low as $6.21 per bushel.
As corn prices dropped, so did wheat and soybeans, which slid 56 cents (-9 percent) and 28 cents (-2 percent), respectively. This massive sell-off in the grain markets will certainly affect farmers' profitability, but many have pre-sold a portion of their upcoming crop, thereby removing some of the sting of this week's drop. For consumers, a drop in grain prices could ease grocery bills and prices at the pump over time, as corn-based ethanol sank nearly 25 cents per gallon over the last two weeks.
Copper outshines precious metals
Since mid-May, copper prices have climbed 44 cents per pound (+11 percent), a faster increase than gold or silver. Copper's rally is especially impressive in light of lackluster housing data and lower energy prices, both of which typically put downward pressure on the red metal.
Many traders feel copper was reflecting recent strength in global stock markets after the Greek debt crisis was alleviated for now. Furthermore, as Japan recovers from the earthquake, it is expected to resume automotive production. The average car contains approximately 50 pounds of copper, and the recent recovery in auto production has increased demand for the metal. As of midday Friday, copper for September delivery was trading at $4.30 per pound, the highest price in two months.
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.