Corn is one of the most popular crops in the world. In many countries, corn is a staple food while in the developed countries, it is used both for food and ethanol production. United States is one of the biggest producer and consumer of corn.
This year, corn has been one of the best performing commodities. It has gained by more than 10%. The main reason for the bullish trend is that traders expect corn producers to slash production by more than 2 million tonnes. A reduced production, at a time when the demand is rising means that the price will rise.
The reduction in corn acreage this year is probably because of soybeans. Soybeans and corn tend to do well in similar conditions. They are planted by the same farmers and their decision is usually based on economic reasons. Since 1964, the corn-soybeans ratio or the corn value in each bushel of soybean value is 2.4:1. When the ratio falls to this level, farmers tend to favor corn and vice versa. This year, the ratio is 2.53:1, meaning farmers are in favor of corn over soybeans.
Couple this with the sanctions China has proposed to American farmers to retaliate against the tariffs placed by Donald Trump. Also, as mentioned above, most corn in the US is used for ethanol production. Ethanol is used as a biofuel, which means that all drivers consume corn whenever they fill their tanks.
Corn futures are now trading at $3.94 per bushel, which is the highest level since July last year. As the planting season continues, we may see the commodity to try and reach the multi-year high price of $4.