Corn Expected to Slump on Expected Record Production

Jacob Harper |

Favorable weather conditions in the US have allowed farmers to harvest what is expected to be the largest corn crop in history. In turn, the price of corn could drop below $4 a bushel for the first time since 2010, with some analysts expecting the price to drop as low as $3.50 a bushel.

The record harvest, spurred by near-ideal weather conditions in July, stands in stark contrast to the drought-ridden conditions last year. In August 2012, the price of corn hit a record of $8.49 a bushel, as the drought was the worst experienced by the US since the Dust Bowl.

This year has been a study in contrasts. Rainfall has been plentiful, and the harvest has been great. In addition, a USDA acreage report issued on June 28 showed 94.7 million acres were allotted to corn production. With the expected record output, corn fell 27 percent in July, its largest single month drop in 17 years.  

Hedge funds are scurrying to capitalize on the record low prices. Speculators increased their net-short position to 108,089 futures and options. Investors started shorting the commodity heavily in mid-July, when weather conditions first appeared favorable for record productions. Corn future contracts are sold in increments of 5,000 bushels.

Some analysts have warned the drastic short on corn might not even be bearish enough. John Setterdahl, the senior vice president for grain marketing and logistics at FC Cooperative Co. in Ames, Iowa said, “Last year the pendulum swung to a record high. It may go lower than people expect this year.”

The next major crop report on corn is due Aug. 12.

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