U.S. corn futures dropped to the lowest in levels in six weeks yesterday as forecasts for favorable climatic conditions across the U.S. Midwest enhanced optimism among grain traders for bumper crops this year thereby facilitating grain glut in an already saturated corn market.
Chicago Board of Trade (CBOT) July corn lost about 7 cents to $3.17-1/4 a bushel in the steepest drop since early May.
In addition, economic worries over the rising novel, COVID-19 infections in the western world, and parts of Africa weakened demand for this vital crop.
Quick fact; Corn futures are designed as standardized, contracts traded on an exchange in which the buyer of the contract agrees to take delivery, from the seller of the contract, at a predetermined price on a future delivery date agreed upon.
Most parts of the western world use corn as an energy substrate for livestock feed. In Nigeria and most parts of the world, corn is also is consumed by humans either by cooking, roasting, its industrial uses include producing industrial alcohol, fuel ethanol, sweeteners, starch, and beverage.
This year America remains the largest producer of corn while China and Brazil come in second and third respectively.
“Weather models got wetter overnight,” said Mike Zuzolo, president of Global Commodity Analytics. “The ethanol correction from the energies is adding to some liquidation pressure as well.”
Grain traders also placed their bets ahead of next week’s U.S. Department of Agriculture (USDA) quarterly grain stocks and the U.S. planted acres reports.
Adding strains on the price of corn futures the International Grains Council yesterday raised its forecast for global corn and wheat production.