Tags: Corn | price | drought | food

Restaurant Group: Corn Could Hit $9.50 a Bushel Thanks to Drought

Thursday, 09 August 2012 08:31 AM

Corn could surge 21 percent during the next six months and hit $9.50 a bushel thanks to a crippling drought that has decimated crop yields, according to a model used by the American Restaurant Association.

Corn has already shot up 50 percent in just two months on fears that hot, dry weather over much of the country will cut into supply.

"It's not infallible but it suggests that there's definitely upside risk here in this market," said David Maloni, president and founder of the ARA Group, according to CNBC.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

"It's alarming, that's why we look at it. We would not be surprised to some type of blow-off occur in corn and soybeans in the coming weeks."

Just two months ago in June, corn hit a two-year low, and analyst agree nobody knows the extent of the damage the drought has inflicted on the economy.

"It just depends on how bad these crops are, and I'm not sure anybody knows how bad they are," Maloni said.

"We're rationing corn and soybean demand. The question is how much demand do we have to ration? We don't know and probably won't know for sure until later this fall."

High prices pose a problem for the U.S. and other economies due to rising demand.

Corn is used as an input to many groceries as well as feed for cattle, poultry and pork.

The grain is also used to make ethanol for fuels and rising prices doesn't bode well for corn.

"From a supply situation, yes, there is the possibility for a run at $9 or above," said Darin Newsom, senior analyst at DTN in Omaha, Neb., CNBC added.

"This is not going to end well for anybody," Newsom said.

"Just about everybody connected to the corn industry is going to feel some kind of pain before this is all said and done."

Other analysts agree, supply looks increasingly strained.

"With the supply falling we have to start rationing demand. I sense importers are not utilizing U.S. corn now but are buying Brazilian corn and the ethanol output dropped in July," said Jerry Gidel, analyst for Rice Dairy LLC, according to Reuters.

"Ethanol plants decided to take maintenance in July and wait for the new-crop to come in."

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

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Thursday, 09 August 2012 08:31 AM
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