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Corn prices have recently been declining. Will this current trend persist? It seems highly likely. The USDA released its Planted Acreage Report last Friday stating:

Corn planted area for all purposes is estimated at 92.9 million acres in 2007, up 19 percent from 2006 and 14 percent higher than 2005. Farmers increased corn plantings 3 percent from their March intentions, resulting in the highest planted area since 1944 when 95.5 million acres were planted for all purposes.

This is substantially higher than what analyst expected (90.454 million acres). This sets a bearish scenario for corn as the recent sell off will continue. In addition, near-term weather is expected to be favorable towards crop development.

On the day of the news, corn futures for July traded 10 cents lower to $3.29 per bushel. Today, corn futures for July are continuing their decline trading 11 cents lower to $3.19 per bushel. Corn prices haven't been this low since the end of 2006.

This is excellent news for ethanol producers if they can hedge effectively. Pacific Ethanol (NASDAQ:PEIX) was able to do so last quarter as it spent an average of $3.69 per bushel. On the other hand, VeraSun (VSE) had to pay more than $4 a bushel. It is evident, though, that both producers will be paying less for their corn this quarter.

Investors are showing optimism due to this decline:

cbotcis

Disclosure: none.

Source: Corn Price Decline Positive For Ethanol Producers