Here’s What’s Driving The Incredible Corn Rally


The key driver for corn prices — beyond weather, inflation and other factors driving up all agricultural commodities — is ethanol use.

Corn for ethanol use has soared from less than 500 million bushels in 1999 to 5000 million bushels in 2011.

Commodities expert Jim Sullivan tells UBS that increased ethanol use will boost prices:

To sum things up, we are expecting a modest increase in corn usage for ethanol next year. But we are still only going to build stocks to about 881 million bushels, which would increase the stocks-to-use ratio to about 6.5%. These tight ending stocks should keep prices high, and it just does not leave much room for any kind of a production shortfall without driving prices higher.

Sullivan targets 102% YOY gains in the second quarter, with a decline during the fall harvest.

title=”Incredible rally so far”