King Corn Extends Its Reign

Corn prices reached $7 a bushel again this week, only the second time in history that prices have been this high. The market continues its upward trajectory due to increasing demand, and an ever-dwindling supply, which will not be replenished until harvest this fall.

Although the average person only eats a few ears of corn each year, the United States produces over 700 billion pounds of corn annually. Nearly 40% of the crop is now earmarked for ethanol production, which serves as a fuel additive and alternative to gasoline. An almost equal percentage is fed to livestock, like cattle, hogs and poultry, which depend on corn to supply a major portion of their daily calories. The remaining corn is either exported to foreign nations like Japan, Mexico, and China, or devoted to other food applications, like the production of high fructose corn syrup, corn oil, or corn starch.

With its essential ties not only to our food industry, but also the livestock, export, chemical and energy sectors, this grain may very well deserve its title "King Corn."

The 117% rise in prices over the last eight months has many end users concerned and re-evaluating their needs, but the price increases have not yet rationed demand. Some analysts warn that corn prices may rise another 5-10% before end users like ethanol producers or livestock feeders begin to change their use. As of midday Friday, corn for March delivery was trading at $7.02 per bushel, a 30-month high.

Silver Glitters over Egypt Jitters

Silver rallied sharply this week on continued concerns over instability in Egypt and other Middle Eastern nations. Investors worldwide sought the perceived safety of the precious metal, pushing prices near their recent highs. Silver also received a boost this week as the Chinese expressed continued concern about inflation, reminding global savers that paper currencies could decline in value. By Friday, silver had added nearly $1 per ounce, rising 3.5%.

Cotton Charges Higher

Cotton prices made a new all-time high on Friday morning at $1.94 per pound, exceeding the previous record of $1.89, made during the Civil War. Prices have risen 384% over the last year as poor harvests, increasing demand, and stockpiling have cut drastically into the available cotton supply. As prices exploded over the last year, consumers didn't feel a significant impact, but some analysts warn that the recent push higher will eventually hit the stores, driving the price of clothing higher.