King Corn Takes Wild Ride

The King of Commodities performed with grandeur this week as decisions to love it or leave it sent prices limit down on Tuesday, then locked limit up on Thursday. (The exchange restricts the amount prices may move daily in an attempt to reduce extreme price changes). Continued shipments to China, increased ethanol and feed demand, drought worries and our farmers' reluctance to sell merged to reverse corn’s downward spiral into a virtual upward explosion on Thursday.

The new crop of corn is being sold at a near-record pace as demand is returning from all sectors, especially for feeding livestock and poultry. The USDA will issue its first estimate of the 2021 crop rating next week, causing eyes to switch back and forth between that data and weather maps. The price of a bushel of corn for delivery in July was $6.55 as of midday Friday, whereas December new crop corn sold for $5.45, down a shade from last Friday.

Corn and Climate Change

Corn requires much larger quantities of rain than other crops, and the rain must come at specific times or major declines in yields will occur. As 90 percent of the crop is planted, the newly emerging shoots and leaves must have consistent moisture. Too much rain will produce problems as well, but current fears focus on the drought monitor. The most critical pollination period will occur in early July when silk and kernel ovule development are extremely water-dependent. Weather during that period could have a profound impact on the crop size and prices.

As U.S. farmers, ranchers, ethanol producers and importers such as China are accepting that global climate change is really happening, fears of drought and disease could make volatility the new normal. The price of corn reached $8.43 per bushel in 2012 on a drought scare, but crashed back to $ 3.25 within a couple years as corn-growing weather improved. Climate change concerns have introduced a new factor which may make the production of corn and its products highly unpredictable.

All U.S. agricultural futures markets will be closed on Monday in honor of Memorial Day.

Words of Wisdom for Commodity Traders

"What we learn from history is that people don't learn from history." — Warren Buffett