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What Moves the Corn Futures Price?

corn price study

Corn futures price seems to be in a bullish trend with prices forecast to rise further with a strong demand and a constricted supply.

Uses of Corn

Corn is a food staple in many countries but the majority of the production is used as animal feed. There is a sharp increase in demand from 2007 onwards, when ethanol which is derived from corn, was introduced as a viable biofuel and additive to the regular fuel.

Daily Corn Prices (CBOT)

Corn Producers

United States is the largest of the corn producers and accounts for almost 40% of the world’s production. A quarter of the production in the US now goes towards making ethanol and this demand is growing steadily. Other major corn producers are China, Brazil and the European Union. The demand as a whole is estimated to remain steady or increase.

Demand and Supply of Corn

As in any trade it is important to know the demand and supply situation to make a good profit and it is no different in commodities futures. The demand side seems to be quite clear as there has been a steady increase in its demand and there is no possibility of it going down in the near future. The supply side is a bit tricky to predict as there are a lot of factors that will govern the outcome.

corn point and figure chart

Corn Futures Price Indicators

But there are many indicators which can help a commodities futures trader. The reports generated by USDA about corn production can give a very good insight into the supply situation for the corn commodity futures. A grain stocks report is released every March end that shows the proposed production for the next 12 months. The overall grain stocks report will indicate the current and proposed stocks.

There is also a monthly production report by which you can keep track of the estimated production and demand situation.

Weather Report More Important Than USDA Corn Production Report

The major factor affecting the production of corn is the weather situation. With weather becoming highly unpredictable and the likelihood of natural disasters, most commodities futures traders seem to be relying more on weather reports and forecasts to get an estimation of commodities futures prices.

Corn Futures Price Now

In the present scenario the supply situation seems to play a major role in the dynamics of the corn futures price fluctuation, as the demand seems to be growing. Corn is planted in the summer months in US and hence there will be quite a bit of volatility during these months. The harvest is taken by November and if the planting gets delayed, there are higher chances of lesser production and correspondingly, corn price will go up.

Where Is Corn Traded?

Corn is mainly traded on CBOT (Chicago Board of Trade) commodity exchange and a single contract consists of 5000 bushels. What makes corn futures markets highly lucrative is that a penny movement affects the contract value by $50. But, you should realize that this can also mean a greater loss if you do not invest wisely.

There is also a statutory limit to the movement of corn futures price to a maximum of 20 cents in a day, so that corn futures price do not get out of hand when certain news and trends overpower the corn commodities futures market.

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