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Investors betting corn prices will surge back

April 9, 2007

Krom River Partners, Mother Earth Investment AG and other investment firms are snapping up corn contracts as prices slip, according to Bloomberg.

Corn prices fell after a March 30 report showed farmers plan a big increase in planting. However, large investors are turning bullish because the increase is not as large as traders expected.

 

In that spirit, a Goldman Sachs Group Inc. analyst predicts corn will shoot to $4.15 a bushel this fall from the $3.66 it retreated to earlier this month.

 

The investors are optimistic prices will rebound due to demand from ethanol plants. Nearly two dozen such plants are in operation or in various stages of planning in Indiana. The state had just one plant as recently as three years ago.

The 90.5 million acres American growers estimate they will plant this year would top the 78.3 million acres grown in 2006 and create the largest planting since World War II. 

 

Though high corn prices boost costs for livestock producers, the higher prices boost other sectors of the farm economy. The additional money sloshes from farmers to implement dealers and other main street businesses in towns across Indiana and the Midwest.

 

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