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Hey! We Found Corn!
Written by Brad Zigler   
Tuesday, 01 July 2008 15:43

The classic good news/bad news story played itself out Monday in the CBOT corn pit. Digesting the Agriculture Department's latest quarterly acreage report, corn futures gapped lower into limit-down territory, below $7.25 a bushel.


It turns out Minnesota farmers are raising more corn than earlier expected, mostly at the expense of spring wheat.

 

CBOT Corn (July '08)

 

 

 

It's not hard to see why. Corn prices looked attractive enough in the May planting season to entice some growers in the northern tier to scotch their acreage allocations for hard spring wheat and other commodities in favor of maize.

Hard red spring wheat fetches $11.75 a bushel now, but only yields about 36 bushels an acre. An acre of corn can yield up to 150 bushels, so even at $7.25, a farmer's productivity - and more importantly - income, can be doubled by switching.

Nationally, farmers told the Agriculture Department that they're growing 87.3 million acres of corn, 1.3 million more acres than reported in the March Prospective Plantings survey.

 
 
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Comments (4)

 Thursday, 03 July 2008 21:18 EST - Posted by Oliver S.

 
I get so sick of the excuses why oil is so
much!At best u can add 20% since '05 and what does it really cost to go from cude to fuel?
OPEC get together and says"we will make x amount to keep price high.
We buyers should get together in one voice and say"this is what we will pay!"

 Friday, 04 July 2008 0:16 EST - Posted by Brad Zigler

 
The cost of crude oil accounts for about 75% of the retail price at the pump. Refining costs make up another 10%, taxes 11% and marketing/distribution expense 5%.

Over the past couple of years, depreciation in the value of the dollar has added about $53 to barrel price of oil.

 Saturday, 05 July 2008 16:54 EST - Posted by Julian Murdoch

 
Also, I personally believe there are a few other things going on here, far more than OPEC refusing to pump more. History has shown time and again that OPEC nations are more than happy to quietly ignore their quotas when they choose too. The conclusion is (and we've covered it here a lot) that they simply CAN'T export more than they already are. Despite record high prices, oil EXPORTS from the big countries are DOWN over the past few years.

If they could export more at record high prices, why wouldn't they? You think they are holding back exports waiting for the price to fall??

 Monday, 07 July 2008 13:12 EST - Posted by Brad Zigler

 
Interesting posts. But why are they attached to this corn column, I wonder.

The trendline for U.S. oil inventories -- depicted as a dashed line on the chart within the column "Oil Guess Getting Better, Still Off (2 July 08) -- is headed downward.



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