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Commodities & Metals

Corn Crop Booms, Prices to Fall (ADM, VLO, HML, TSN, GIS, K)

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By Paul Ausick Published
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Fears for a supply shortage of corn earlier this year led the world’s farmers to plant more of the crop on expectations of higher prices. Now that the crop is in, it turns out to be a sixth consecutive record crop and will surely push prices down next year. That’s good news for makers of ethanol like Archer Daniels Midland Co. (NYSE: ADM) and Valero Energy Corp. (NYSE: VLO) to meat processors like Hormel Foods Corp. (NYSE: HRL) and Tyson Foods Inc. (NYSE: TSN) to cereal makers General Mills Co. (NYSE: GIS) and Kellogg Co. (NYSE: K).

The US Department of Agriculture is forecasting a global corn crop of 867.5 million metric tons and analysts survey by Bloomberg News are forecasting a price of $4.305/bushel next year. Corn is trading today at about $6.20/bushel.

Demand for meat is driving the demand for corn and wheat as feed for cattle, pigs, and chickens, with total demand for feed expected to reach 640.6 million metric tons in the crop season ending next Spring.

The US share of the booming corn crop will decrease to less than 50% for the first time in 40 years.

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About the Author Paul Ausick →

Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.

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