Corn Trading Near Record Highs
Corn prices continued to probe record highs Thursday amidst the growing drought across the corn belt in the U.S. Front-month corn futures rose to $810.25 in early Chicago trading as hot weather and little moisture continue to plague large swaths of the United States. They have since pulled back to $779.25
On Monday, the USDA reported that only 31 percent of corn crop planted as of July 13 was of good quality as compared to the 40 percent reported the week earlier. The rapid drop in the quality of the corn crop is driving prices higher, which will eventually impact the consumer.
Companies such as Coca-Cola (NYSE: KO) have been noting in guidance that higher corn prices could impact margins. Higher corn prices will affect everything from the price of corn syrup to fuel at the gas station. An increase in corn prices will also spill over to other commodities over the next few months, as farmers planting new seed will plant more corn to lock in higher prices.
Soybeans and corn need relatively similar soils, so farmers could plant less soybean and more corn. They would proceed to lock in the high prices in corn in futures contracts expecting prices to fall due to the extra supply. In this scenario, soybean prices would rise.
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