Analysts at Dutch-based Rabobank have predicted that US corn prices could rise another 25% by the end of the year on lower yields due to hot, dry weather. That would raise prices to around $7.90/bushel, less than a dime from the all-time high of $7.99/bushel.
The bank’s forecast is based on its belief that the lack of rainfall has so dried out the soil that mid-July’s peak pollination period is threatened. Rabobank is cutting its yield estimate to 154 bushels/acre, which would leave US corn stocks below 1 billion bushels for the second year in a row. The US Department of Agriculture is forecasting a record yield of 166 bushels/acre, while a Reuters survey of agriculture analysts forecasts yields of 157 bushels/acre.
The impact of higher corn prices is affecting US ethanol producers as well. Valero Energy Corp. (NYSE: VLO) yesterday temporarily idled a plant in Indiana as a reaction to the higher prices. Valero had already shut down its 100 million gallon/year plant in Albion, Nebraska due to high prices and lower demand from drivers, and has also closed another 100 million gallon/year plant in Fort Dodge, Iowa, for a planned overhaul.
Corn futures are currently down slightly at $6.485/bushel, and the Teucrium Corn Fund (NYSEMKT: CORN) is down about -0.6% at $41.89 in a 52-week range of $35.23-$50.69.