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1997, 2007
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| Futures Special | By Financial Trader Research Staff and LM Lupo | ||||||||||||||||||||
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| Corn Fundamental Analysis | |||||||||||||||||||||
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A near perfect confluence of events has transpired to create an extremely bullish environment for grain markets, particularly corn. Not since the bull market in '95--we were on radio then-- when prices rocketed above $5.00 for corn and higher for wheat have we seen such potent fundamentals support the entire grain complex. We thought $4.00 was achievable then, yet $5.00 was breached like a bandit through a cheap screen door. In a word, the fundamental driver is simply ethanol. The hungry bio-fuel's appetite is causing prices to be licked up by China and Wall Street. A simple graphic tells the story even better.
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The conservative estimates for the corn crop by the USDA and NARMS
above does not even factor an unfavorable growing season for US corn or
other grains. In addition, the export figures assume a tepid
Chinese demand, which we find alarming. The 1995 bull market
was completely demand driven with only a modest weather premium and yet
corn prices, as did the rest of the grain complex, soared to record
highs. Food and feed is the largest component of corn
consumption and a relatively stable variable. It is the
export demand, ending stocks, and of course actual harvest supply that
will surprise many in our opinion. Ethanol producers are now
poised to panic buy corn futures as are export partners given the long
term pressure exerted by ethanol producers, which will only strengthen
rather than flatten.  |
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For article comments: editor@financialtrader.com Making market order out of market chaos.© FinancialTrader.com 1997-2006© |
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