Commodities Trading: Corn

Corn is in most crunchy morning cereals, all the way to the popcorn you buy at the movies. Sometimes colloquially referred to as ‘yellow gold’, corn is one of the world’s most versatile agricultural products, with a myriad of uses. It’s primarily used as a livestock feed, but also serves as a core ingredient in ethanol and other industrial products (glue, paint, etc).

The most common variety of corn traded on the commodity market is the field corn or dent corn. It accounts for almost 70% of the corn grown in the United States, which is the top global producer. Other producers include China, Brazil, the EU, and Argentina. Japan is the world’s largest importer of corn, followed by Mexico, Korea, Egypt, and Spain.

Interesting Facts You Probably Did Not Know

  • Corn is a part of the grass family. It’s planted in the spring and harvested in the fall.
  • Corn can be produced in various colors including blackish, bluish-gray, purple, green, red, white, as well as the common yellow.
  • Juices and soft drinks like Coke and Pepsi contain corn sweeteners. A bushel of corn can sweeten 400 cans of soft drink.
  • CBOT Corn futures are traded in lot sizes of 5000 bushels. But it can also be traded on-the-go as a CFD instrument.
  • The factors that influence corn’s price movements – US Dollar, demand for corn-based ethanol, government regulation, weather conditions and natural disasters.

Corn in 2017

  • The USDA Grains Supply and Demand Report released on July 12 provided negative numbers for future corn prices. The Report showed rather high levels in the projected ending stocks for corn by September 1, 2018.
  • The decline in wheat prices directly affected the corn prices. Due to the low corn prices, Nebraska, well known for producing huge quantities of corn opted to choose dry edible beans, the kind that goes in chili, burritos, and soup.

Corn prices surged in 2007 due to an increase in the demand for corn by ethanol plants. However, the demand saturation after the ethanol was blended at a 10 percent level throughout the country combined with the global financial panic and the economic slowdown of 2008 caused its prices to take a massive tumble.

From 2010 to end of 2012, corn prices had an exponential rise due to severe drought and low stock of corn. But in 2013, a record production of 13.9 billion bushels of corn sent prices spiraling downwards. Corn production rose again when the USD recovered. The dollar’s strength caused top producers like Brazil and Argentina to increase output for exports.

For 2018-2019, Commerzbank anticipates a bearish bias for corn due to the “less tightening” corn balance sheet. On the other hand, Focus Economics said that “lower production in key countries such as Brazil and China will likely also boost prices. Corn prices should rise from their current low-level thanks to greater market demand.”