Corn prices are back at record levels, with US futures hitting a new peak of $6.30 a bushel last week; they have jumped by about 75% in the past year and 40% this year alone. And as Barclays Capital has noted, further price gains are likely.
Global food demand is rising as diets become more protein-based amid mounting wealth in emerging markets; corn is used mostly for animal feed.
Record oil prices are fuelling demand for alternative fuels, such as corn-based ethanol. According to the American Department of Agriculture, the US biofuel industry will consume 33% of America's corn crop in the 2008-2009 season, up from 22% a year earlier.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
On the supply side, the situation is "dangerously tight", Gavin Maguire of Iowa Grains told the FT. American farmers are set to reduce their corn planting acreage by around 10% this year as they chase high soybean prices and production will slide to 12.1 billion bushels from 13.1 billion last year.
Inventories are expected to decline to their lowest levels since 1996 by the end of the 2008-2009 season, 45% down on this year. No wonder, then, that some analysts are warning that corn could hit $7 a bushel in 2008.
-
What happens if you can’t pay your tax bill, and what is "Time to Pay"?Millions are due to file their tax return this Friday as the self-assessment deadline closes. Though the nightmare is not over until you pay the taxman what you owe - or face a penalty. But what happens if you can't afford to pay HMRC your tax bill, and what is "Time to Pay"?
-
What does Rachel Reeves’s plan for growth mean for UK investors?Rachel Reeves says she is going “further and faster” to kickstart the UK economy, but investors are unlikely to be persuaded
