U.S. farmers' fears have been confirmed — the U.S. corn crop appears to be the worst since 1995. The U.S. Department of Agriculture released a closely-watched report predicting that this year's crop would yield a measly 123.4 bushels per acre. Although recent advances in drought-resistant seed design have been dazzling, this summer's baking heat and lack of rain have proven to be too much for delicate corn plants.
As recently as last month, farmers were still holding out hope that average yields would climb above 140 bu/acre. Farmers and investors braced themselves all week for the USDA report, released Friday. In the run-up to the report, corn futures dashed 25 cents per bushel higher. In the moments after the report, the December contract hit $8.49/bu. — a new record high.
UN Strikes Back Against Ethanol
On Thursday, a United Nations official called for the United States to alter its ethanol policy. José Graziano da Silva, director-general of the UN's Food and Agriculture Organization called for "an immediate, temporary suspension" of the ethanol mandate.
The mandate currently requires U.S. fuel companies to mix 9 percent of corn-based ethanol into their gasoline. With corn prices hitting all-time highs, the UN says that more corn should be directed towards food production, and less to gas tanks.
Thus far, it does not seem likely that the U.S. will concede to the UN's request, leaving corn prices still near record highs as of midday Friday, with December corn trading at $8.20/bu.
Black Pod Disease Causes Cocoa Concern
Cocoa prices climbed on worries that an outbreak of black pod disease could damage crops in Nigeria and the Ivory Coast. Black pod disease, caused by a fungal infection, is the leading cause of cocoa crop loss worldwide.
Threats to supply coming out of West African nations like Ghana, Nigeria and the Ivory Coast can have far-reaching implications on the price of cocoa, since these countries produce as much as two-thirds of the world's cocoa annually.
As of midday Friday, cocoa for September delivery was worth $2,460 per metric ton, up over $300 (+14 percent) over the last month.
Walt Breitinger is president of Breitinger & Sons LLC, a commodity futures brokerage firm in Valpairaiso, IN. He can be contacted at (800) 411-3888 or www.indianafutures.com