Deteriorating Yields Blast Corn Higher

Images of anemic plants, gasping before the unrelenting sun, served as a backdrop to this week's 58 cent rally in the corn market. Some farmers in key states such as Illinois, Indiana, and Michigan have already called their crop a complete loss, while others took little comfort at the sight of unusually thin kernels developing within the fledgling ears.

According to a USDA report released last week, the predicted nationwide yield had fallen from over 160 bushels per acre to a meager 146 bu/acre. Since then, little rain has fallen and temperatures have remained above 90 degrees in large swaths of the Corn Belt. As a result, some analysts state that the corn crop has deteriorated as much as 7% since last week's report came out.

End users of corn such as livestock feeders and egg producers heavily bought December corn futures in order to protect themselves from additional price hikes going into harvest. Those farmers whose crops were still in adequate condition adamantly held off from selling, causing the December contract to appreciate as much as 8% this week alone.

Meanwhile, the September futures contract traded as high as $8.16 Friday morning. This was a new all-time world record. As of noon Friday, December corn futures were trading at $7.85/bu, up 45 cents on the week.

Despite New Bailout, Euro Hits New Lows

Germany, the European Union's largest economic power, approved a 100 billion-euro ($122 billion) financial rescue to ailing Spanish banks. Despite this, the European currency fell to fresh 2-year lows, indicating that investors do not believe that Europe's sovereign debt crisis is over.

The German parliament approved the bailout Friday in order to prevent a potential collapse of Spain's financial system. Spain's unemployment rate is over 24 percent, and its economy is officially in recession.

Instead of acting jubilantly that Germany had "loosened the purse strings", investors saw Germany's move as an indication that Europe's problems are deeper than had been previously thought, and sold Euro holdings. A report that the region of Valencia would seek an emergency bailout from Spain's central government did not help to contradict an overall feeling of cynicism towards Europe's prospects for short-term economic growth.

As of Friday morning, the September Euro currency futures contract traded as low as $121.5 -- the lowest level since June of 2010.