Short Analysis On An Article From WSJ - Corn Commodities

Corn as a commodity has reached its lowest level of prices in four years after the virtually perfect summer for the crop. It was not too hot, obviously not cold, and had just the right amount of rain to spur extra growth despite the fact that farmers did not plant crops in as many acres this year as they did previously. The U.S. is the leading grower of corn in the world and currently has a surplus that they are trying to decrease. This year's results don't seem like too much of a concern yet for a couple of reasons. The first is that there is still room for changes in weather. Last autumn, there was an early frost in October, which is likely to happen again this year given the mild temperature this summer that allowed corn to grow so well. After a fall in corn prices in September to $3.35¾, their commodity futures rose to $3.46½ after worries that an early arrival of cold weather could harm the corn yield. States that were a concern to commodity investors were Minnesota, Iowa, Wisconsin, and North and South Dakota. Another reason that concern is not nearly as high is that corn is used for more than just barbeque dinners and corn mazes. A lot of the time, it is used to feed livestock, which we then use for processed meats and other food. Several other examples of uses include ethanol (used in car oil), corn starch, a medium to grow penicillin (an antibiotic), corn sugar/corn syrup, whiskey, and industrial glue. It is still a slight danger to have such high supplies of a commodity, but the risk is mitigated a little due to the fact that it use is diversified. If weather does not ruin this year's corn supply, then farmers can further reduce the acreage that they use to grow corn and use that area for other purposes next year. For example, grapes recently rose in prices due to low supply of quality grapes, so the extra area could be used for that fruit. According to forecasted weather in Minnesota (mostly a farming state), weather is not expected to drastically drop. Weather does change, however, so eventually the time will come when corn is not able to grow anymore, but that time should not come early, as some analysts have feared. Corn futures are rising because of this surplus and price decrease for corn. Right now is not the time to make drastic decisions or become concerned because weather and crops cannot be perfectly forecasted and corn commodity futures could change in an instant if the crop yield is suddenly reduced.