Corn Futures Bull Market and Ethanol Demand


Visitors: 362

The USDA recently came out with their estimates for corn ending stocks at .935 billion bushels which is 8% less than last year and an 11 year low. In fact the last time corn stockpiles were this low corn futures prices hit an all time high of over $5.00 per bushel. There is no guarantee that this same supply scenario will lead to all time high corn future prices again but massive amounts of new corn acreage will be necessary to keep up with the current demand and put a lid on rising corn futures prices.

Another consideration is the weakening US Dollar which makes American grains cheap to foreign buyers. There is more than a little talk by China and other Asian countries about reducing their amount of US Dollar holdings in favor of stronger currencies such as the Euro and the British Pound. This increased foreign buying power should lead to increased foreign demand and can also have an extremely bullish effect on corn futures prices over the near term.

Many analysts believe that crude oil futures prices must remain above $50 per barrel in order for ethanol production to remain profitable. Ethanol demand and usage is growing dramatically since the US government mandated its use instead of MTBE which was found to be poisonous to groundwater supplies and potentially harmful to humans. This mandate to use ethanol as a gasoline additive may also cut into the already tight corn supplies an help push corn futures prices higher.

There are two basic ways to speculate in the expectation of higher corn futures prices. Investors can purchase or go long corn futures contracts or purchase call options on corn futures. Many new investors choose purchasing call options on corn futures because of the finite risk aspect of purchasing options. Visit to learn more about the mechanics of futures and options investments.

Before investing in corn futures or corn options investors must understand one basic truth. High profit potential investments such as corn futures and corn options carry with them a correspondingly high risk of loss potential. Investors in corn futures and options should only use risk capital because there is risk of loss in futures and options trading.

Visit to learn more about the risks of commodity investing.

The author is a 13 year veteran of the commodity trading markets and the owner of a commodity trading company.


Article Source:

Rate this Article: 
The Next Bull Market
Rated 4 / 5
based on 5 votes

Related Articles:

Changing Corn into Ethanol

by: Sandra Case (July 02, 2007) 

Bear Market, Bull Market or Dead-Cat Bounce...It Matters Little to the Stalwart .

by: John Whitefoot (June 29, 2006) 
(Finance/Stocks Mutual Funds)

How to Trade Stocks Part 4 Bear Market, Bull Market, What the H?

by: Chris Best (June 23, 2008) 

Bear and Bull Market Run is Unpredictable in the Stock Market

by: Vijay Kumar Sharma (October 16, 2008) 

Cash In On The Booming Demand For Futures Trading - Understanding Good Habits

by: David Jenyns (December 21, 2005) 
(Finance/Currency Trading)

Home Ethanol Production - How is Ethanol Good For the Environment?

by: Jonathon Winburg (October 02, 2008) 

How To Make Ethanol - The Secrets Of Making Ethanol

by: Allen Walker (April 03, 2008) 

Fuel Efficiency of Ethanol - What Are the Benefits of Using Ethanol?

by: Jonathon Winburg (October 02, 2008) 

What is a Bull Market?

by: Gilbert Stockton (October 29, 2008) 

The Next Bull Market

by: Al Thomas (April 14, 2005) 
(Finance/Stocks Mutual Funds)