Corn Rallies, Despite Record Harvest

Corn prices topped $3.58 per bushel on Friday morning, the highest price in almost three months. Corn is accelerating higher, even as a record crop is coming in out of the field.

Over a third of the corn crop has already been harvested, and the USDA is expecting that it will be the largest on record, topping 15 billion bushels.

Normally, the harvest onslaught would be depressing prices, but farmers have been holding onto their corn, waiting to sell at higher prices. This is restricting supply, which is helping to fuel the rally.

Meanwhile, there has been strong demand from foreign buyers for U.S. corn and corn-based ethanol, which is helping to sop up the extra bushels.

Longer term, the corn market will likely need to see rising demand from foreigners to consume the ever-growing harvests. Since the early 2000s, U.S. corn production has increased a whopping 50% due to technological and seed science advances.

Natural Gas Heats Up

Natural gas prices exploded on Thursday, reaching $3.36 per million British thermal units, the highest price in almost two years. Gas is becoming more expensive as many weather forecasters are calling for a colder winter this year, which could help draw down the current record-high inventories.

Adding fuel to the fire, news broke this week that China was dramatically increasing its natural gas imports.

Globally, most natural gas is transported via pipeline, making each regional market relatively insulated, but there has been an increasing trend to convert natural gas to a liquid form, which allows for transportation by boat. The U.S. has recently begun increasing its liquefied natural gas (LNG) exports, which allows us to sell our excess production on the global market at substantially higher prices. Long term, this trend could raise prices domestically, but also boost profits for the energy production industry.

Looking ahead to the colder months to come, the futures markets are expecting prices over $3.60 this winter, a substantial price increase over recent years.