Corn energized

Since mid November, corn futures have shot past $5 per bushel, up from less than $4. “It has been a very consistent trend,” says Elaine M. Kub, analyst for DTN. “Ever since harvest, we have been trading on the idea that next year’s crop has to be profitable for farmers, and their costs are rising.” While corn will need to battle for acres with soybeans and wheat, which also are trading at or near all-time highs, she says that due to increasing yields, local markets and better science, corn has become more attractive for farmers. “There will be a lot of it and it doesn’t have to be as competitive as the other crops,” she says, adding the high will likely come in February; then corn will trade sideways to down, from $5.30 to $4.75 per bushel.

Strong domestic and export demand is factored in, limiting the downside potential for this year’s crop, says Shawn McCambridge, analyst for Prudential Bache Commodities LLC. Now attention turns to the 2008/2009 crop and the March 31 USDA planting intentions report. Psychological support is between $4.90 and $5, and in March, we could see a high of $5.41. “That high will hold unless there is clear definition that farmers had shifted more acres out of corn than we anticipated,” he says, adding that index funds have set their major positions.