Corn prices for this fall’s harvest continue to trade for $4.20 per bushel, near a two-year high. Prices are being supported by drought and crop shortfalls in China, Brazil, and Argentina. While the United States is the king of corn production, these countries are next in line, and together account for almost a third of global supply.
Meanwhile, global demand for corn has been rising, primarily due to corn-based ethanol use. The U.S. has been increasing ethanol production to sell abroad, and China is rapidly expanding its own ethanol production facilities, with production expected to increase by 25% in just a few years, soon rivaling U.S. fuel ethanol generation.
In the U.S., there is still a near-record large stockpile of corn after five years of bin-busting harvests. However, farmers likely planted fewer corn acres this year, which, when coupled with rising foreign demand, could lower U.S. stockpiles to the lowest level in five years next summer.
The global issues are making an ideal setup for Midwestern farmers, as prices are rising at a time when they have large stockpiles and low fear of weather problems in the Corn Belt this summer, giving them potential for a profitable year.