U.S. Corn Outlook Downgraded Again

The outlook for the corn crop in the United States was downwardly revised again by the U.S. Department of Agriculture, as the price of corn traded at a record $8.49 a bushel on Friday, with investors taking profits on Monday, as prices pulled back to $7.89 a bushel on the Chicago Board of Trade for December delivery.

For the year, corn is estimated to come in at 10.8 billion bushels, down 13 percent from the 2011 yield. The average yield per acre is expected to be at 123.4 bushels, the lowest level since 1995.

Next growing season has also drawn concern, as the drought could continue on through the latter part of October, resulting in the depletion of water and further soil damage.

José Graziano da Silva, director general of the FAO, called upon the United States to suspend the foolish (our words) federal ethanol mandate which takes 40 percent of the domestic corn crop and wastes it as fuel.

The price of corn could reach from $9 a bushel, all the way up to $10 a bushel, depending upon the actual amount of corn that is produced, which has yet to actually be determined.

Time to Sell Corn?

For those just starting to take a look at corn as a potential investment, it's something that should be held off on, even though Goldman Sachs (NYSE: GS) recently raised their price target on corn to $9 a bushel, and Morgan Stanley to $10 a bushel.

Those price targets were based on nothing more than probable momentum, and most likely the USDA estimates for damage being lower than the reality of the situation on the ground, which is surely far worse than the conservative estimates of the USDA.

Having said that, corn has been rising in price so quickly that it needs to take a breather.

You can tell that from the response of traders to the news that significant rain should hit parts of the Midwest this week. Traders sold off some of their corn, resulting in the price falling by over 5 percent for December corn.

That's important because the damaged corn in the fields are beyond saving, which is up to 50 percent of the corn planted in the region.
In other words, traders were looking for almost any excuse to sell, even though rain will do nothing to boost the quality of the damaged corn, neither save any of it that has already pollinated and is in poor or worse condition.

If someone is interested in trading corn, the best thing to do would be to wait until this selling period ends and then take a close look at the overall picture.

Another element to consider is the threatening drought in parts of Europe and the same in areas of Australia.

For those holding corn, there is a lot of potential upside over the next couple of months, and seeing which usually highly productive areas of corn country are receiving significant rain will tell whether or not corn will continue to surge up in price.

Another factor is how the high price of corn will affect other uses of the grain. It's certain that some of the uses for corn will fall in response to the higher prices, which will do some to pull back on the rise in corn prices.

More devastating weather in the Midwest of the U.S., and other areas of the world, could overcome that response and send corn soaring.

But if the promised rains come and corn that can still be salvaged ends up doing okay, $9 a bushel is probably the tops we'll see.

Probably the only thing that would change that if corn in good condition recovers is if new investors get in bidding up the price without knowing what they're doing.

European Corn Now Being Hit by Drought

While the focus on the hot temperatures and drought conditions in the U.S. have been garnering much of the news surrounding corn around the world, parts of southern Europe and stretching through into Ukraine are now starting to get hit by drought-like conditions as well, with temperatures rising to about 5 degrees Fahrenheit above normal, to 95 degrees Fahrenheit.

Accounting for approximately 16 percent of global exports, Europe is now adding to the concerns over how high the price of grains will go this year and how it will affect food prices.

Similar to corn in the U.S., the corn in the European region mentioned has now entered is pollination stage, which is the worst timing because it's that phase of the growth which determines the corn yield.

It is now clear that Europe will now have to import more corn and wheat than normal.

According to the USDA, EU corn yields are projected to drop about 12 percent over last year to about 6.73 tons a hectare, which is a little under two and a half acres.

Countries being hit the hardest in the EU are Italy, Hungary and Romania.

Since the middle of June, corn on the CBOT has soared by 57 percent to $7.9375 a bushel. Goldman Sachs (NYSE: GS) projects prices to climb as high as a record $9 a bushel within 3 months.

Wheat has been rising along with corn, with prices jumping to $9.4725 a bushel.

Soybeans, which are also in danger from under performance, has jumped to $16.4475 a bushel, a 36 percent increase. Along with corn, it has recently set all-time highs.

In early July the International Grains Council estimated the global corn crop to rise to 917 million tons this year, but the ongoing damage to crops around the world wasn't reflected in those numbers, which are sure to drop when the next report is released on July 26.

U.S. Corn Prices Approaching All-Time High

In Friday morning trading, corn futures jumped again, closing in on an all-time high for U.S. corn, as rising demand in Asia and a destructive drought continue to wreak havoc on the sector.

Weather forecasts were part of the boost in corn price, as they projected rising temperatures and little rain in key corn-growing areas.

Consequently, the condition of the corn will continue to deteriorate, with a growing percentage reaching the point of no return, as some farmers have already began to plow their corn under.

The only good news is the light rains could slow down some deterioration, extending slightly the time frame the corn needs for significant rains to salvage the season. It stands now at less than two weeks before it could become an extraordinary disaster if rains to come in the amounts the corn crop needs.

On the Chicago Board of Trade, the front-month July corn contract jumped to $7.92 a bushel, rising 20-3/4 cents. That's just below the all-time high of $7.99-3/4 a bushel.

Corn for December delivery on the CBOT rose to $7.45-1/4 a bushel, gaining 13 cents, at 8:20 AM CDT.

Price for the new crop contract have soared close to 48 percent over the last month, climbing 18 percent already for July.

If the drought continues, soybeans, which pollinate later than corn, could be the next victim of the drought if weather patterns don't change soon.

Soybeans and wheat continue to rise in price as well, with concerns over the effects of the drought on soybeans if it continues, and expectations wheat demand will rise as corn prices continue to soar.

Weekend Corn News Roundup

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CBOT Corn Outlook: 1-2 Cents Lower On Light Profit-Taking

Chicago Board of Trade corn futures are expected to open 1-2 cents a bushel lower after prices reached technically overbought conditions and as traders take some profits ahead of the weekend, analysts said Friday.

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Corn Looks to Trend Higher

On Thursday, April 3, July corn prices were up 4.25 cents, closing just shy of the highs at $6.13 a bushel.

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In The Cattle Markets: Prospective Plantings Will Not Help Feeders

It has been a tough winter and early spring to make money in the cattle feeding business and Monday’s USDA Prospective Plantings Report will not likely help feeders.

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Japanese food processor to accept GM corn

Japanese wet miller, Kato Kagaku Co., Ltd., will start accepting non-segregated genetically modified corn for starch, sweetener and processed food production.

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CBOT Corn Review: Down Slightly On Pre-Weekend Profit-Taking

Chicago Board of Trade corn futures gave back a small portion of this week's gains as the market became overbought and traders decided to book profits ahead of the weekend, traders and analysts said Friday.

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Corn Prices Surpass $6 A Bushel: Investors, Grab Your Overalls

Corn prices have jumped dramatically during the past few months, hitting a record high of more than $6 a bushel. Demand for corn has increased, and the outlook concerning whether future supply can meet this demand is uncertain.

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Monsanto to build seed corn facility near Independence

On the same day it announced record-setting second-quarter revenues, Monsanto Co. announced an Iowa site for a new seed corn facility, moving forward on expansion plans within the state.

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Corn Settles at $6, after Record $6.025

The story for corn continues to be the projected supply problems, and the resultant surge in prices. That story continues, as corn broke another record today, reaching $6.025 a bushel before settling to $6. Corn has already increased by 30 percent this year, as demand increases.

This follows yesterday's prices, which just fell short of the $6 a bushel mark.

"It's a demand-driven market and we may not be planting enough acres to supply demand, so that adds to the bullishness of corn," said Elaine Kub, a grains analyst with DTN in Omaha, Neb.

We also talked about the decreasing acreage being planted in corn this year, which have dropped by about 8 percent across America.

The wet weather continues to wreak havoc in the industry as well, with plantings not only being put off, but growers talking about abandoning corn planting this year if it continues on too long.

The ethanol industry continues to cause problems for corn, as it gobbles up valuable resources; not only on an unproven alternative fuel, but one that may not to be grown profitably at these prices. That's what you get for government mandates and interference.