Corn prices are up more than 50% since the beginning of summer and 15% in the last two trading sessions.
It’s clear that big agriculture is unable to compensate for the floods in June and drought in August.
If you thought the Congress might reduce corn subsidies — as the result of high-fructose corn syrup paranoia — you were wrong. If anything, they might increase.
Here’s the ugly maths behind the corn surge:
On Friday, the U.S. Department of Agriculture released a downward revision of 3.8% for this year’s corn crop after the effects of flooding in June and a dry August have become more clear.
After last year’s record crop of 13.11 billion bushels, the report lowers this year’s forecast from 13.16 billion to 12.664 billion bushels which would be the third highest crop on record.
Even with a near record crop yield, the ratio of stocks at year end to demand is now forecast to fall from 8.4% to 6.7%, the lowest since 1997 (see chart).Demand for corn calories and biofuel is expanding faster than supply and with big agriculture’s extensive use of corn feed and efforts to rebrand high fructose corn syrup as “corn sugar”, that increase in demand is unlikely to slow.