Corn tumultuous, housing stronger in 2012

Dec 28, 2012


Here is this week’s edition of Futures File, our weekly commodities wrap-up:

Corn’s Tumultuous Year: A Look Back
Corn prices made a record high this year as drought ravaged crops across the Midwest. Despite the fact that farmers planted the most acres of corn since 1937, this year’s corn crop was relatively small due to drought-induced low yields. As corn baked throughout the late summer, market expectations of a dangerously small crop pushed prices to a record-breaking $8.43 per bushel.
Since late summer, good weather through harvest reduced fears of shortages, while still-high corn prices turned off many would-be buyers, decreasing demand. Furthermore, South American farmers will be harvesting their corn crop soon, increasing global supplies. As a result of a less-tight corn market, prices have dropped precipitously over the last four months, falling $1.50 per bushel (-18%).
Despite the sharp sell-off, corn prices are still at historically high levels. Trading Friday at $6.90 per bushel, corn is more than triple the price from ten years ago. Most analysts do not expect corn to return to the early 2000’s lows under $2.00 per bushel, unless there is a drastic change in U.S. ethanol policy or global meat consumption, the two major sources of demand for corn worldwide.
Housing a Bright Spot
After suffering through five years of sliding prices following the housing bubble, homeowners are hoping that the downturn is over. According to the widely-followed Case-Shiller Home Price Index, prices nationwide are up over 4% over the last year. Other housing market indicators, such as existing home sales, housing starts, and existing home inventories, all point toward a strengthening market. Economists focused on the prospects for US economic growth are encouraged by the housing market, which has contributed to the recent “green shoots” of the current economic recovery.
For commodities traders, stronger new home construction could increase demand for lumber and copper, two markets that depend heavily on construction. As of midday Friday copper for March delivery was worth $3.60 per pound and March lumber (comprised of random-length 2x4s) was trading for $391 per thousand board feet.



"If the Basel Committee decides to grant gold a favourable liquidity profile under its proposed Basel III framework, it will open the door for gold to compete with cash and government bonds on bank balance sheets - and provide banks with an asset that actually has the chance to appreciate."

Do you want your bank to be holding cash, govt. bonds or gold as capital reserves?

Looks very bullish.


Remember the golden rule: "Those with the gold make the rules."


Gov'ts that rely on fiat currency to artificially pump up their economies tend to dislike gold because they can't print it.

Basel II ruled that mortgage backed securities were riskless. Ooops! That didn't work out too well for banks in '07.

Basel III may rule that gold is money.

Got gold?

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