Less than half of the corn crop was harvested as of September 22, and thus, the biggest price factor for corn over the next month will be the size of the harvest. Although prices resurged on Friday due to the decrease in stockpile as stated by the USDA’s quarterly grain stocks report, the price of corn may feel the downward pressure again due to the on-going harvest. In fact, the lack of demand (such as the decrease in export) may continue to dampen corn prices. Hence, I may continue to short corns.
http://www.futuresmag.com/2012/09/28/us-corn-stockpile-unexpectedly-drops-sparks-price
In addition, wheat consumption increased by almost 30 percent during June to August as compared to last year. This is due to the increased demand to use wheat as a food source to feed the livestock as the corn price soared and corn supply decreased during this period. Hence, wheat substituted corn as the feedstock and this explains why the price of wheat is highly correlated to the price of corn. Although wheat harvest was ample this year (2.27 billion bushels and a record high in eight years), there may not be enough wheat to meet the demand because of the shortage of corn supply. Hence, the price of wheat may rise, especially if corn prices remain high.
http://af.reuters.com/article/commoditiesNews/idAFL1E8KSBZ820120928
We seem to be looking at similar markets and trends. However, I wonder why you assume demand for corn is so much lower than usual. In Rabobank’s monthly report (my most interesting cross-product summary of the week), ethanol demand HAS dropped significantly over the last few months. I do recognize, of course, that this is only one indicator of market demand, but it may be a reliable one. (I say that without being confident of how closely together ethanol and corn markets move.) However, since we are dealing with relatively short trades, I decided to go long in December corn to capitalize on more volatility in the near future. Let’s see who predicts correctly, and which of us gets in and out of the market at the better times.
hi annie~ thanks for the comment. i did not really look at ethanol. i mainly looked at the export of US corn (which is a part of corn demand as well). US is the largest world producer for corn, however, in this week, the export for US corn is only approx 400 tonnes which is a tiny amount. The US corn export was approx 70,000 tonnes last week (the export differences are dramatic here). In addition, the US corn prices may be overvalued as compared to other countries and local US meat producers are ordering corn from overseas. Hence, the demand for US corn decreased. However, the overall price change is dependent on both the supply and the demand (let’s see which inward shift is larger next week) as well as the demand and supply curves’ elasticities.