If you are still adjusting to the reality of $5 corn, David Drozd has a message – don’t get too comfortable, because his chart analysis points to corn reaching $7.30 US.
Drozd, a grain marketing adviser and president of Ag-Chieve in Winnipeg, is bullish on most crops right now, but corn is his pick for 2008 and part of 2009.
“I’m more bullish on corn for the next 18 months, than any other crop,” said Drozd during his market outlook presentation at the Manitoba Special Crops Symposium, held Feb. 20-21 in Winnipeg.
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Drozd expects corn’s momentum from $2 in 2005 to more than $5 this year to push through more price barriers this year. Although he credits ethanol and unprecedented world demand for the surge in prices, the technical analyst believes other market factors are also significant.
“I really believe you’re going to continue to see the flow of money out of the bond and stock market, into the commodity market,” said Drozd, who pointed to exchange traded funds (ETFs) as a major reason for corn’s rise.
An ETF provides a convenient tool for investors to speculate on the price of agriculture commodities.
“This one fund … it was an offering of $1.6 billion… and that one fund would buy and hold 11 percent of the U.S. wheat carryover and three percent of projected corn stocks.”
That represents just one ETF issued two years ago, Drozd said. Since then, financial institutions have created many new ETFs, boosting the amount of speculative money in commodity markets.
Moving his outlook back to the fundamentals, Drozd is not convinced that a shift to corn, planted on marginal land, will produce the yields needed to satisfy the expanding world demand.
Manitobans, however, will do their part to meet that massive demand, as industry leaders expect a larger corn crop in the province this year.
Gary Unrau, president of the Manitoba Corn Growers Association, said 170,000 acres were planted in 2007.
“I would suspect there would be a 10 to 15 percent increase this year,” and the total could reach 200,000 acres, he said.
He noted there was more corn seed booked than went in the ground last year, as some producers were deterred by high fertilizer costs. But more growers are now accustomed to the higher costs, which may mean more corn acres in Manitoba.
Also adding to corn’s appeal, Unrau said, is the potential for big yields. Most farmers expect 100 bushels an acre, but reaching 150 bu. is not out of the question. That bonus potential is attractive to growers, he said.
Corn is primarily grown in south-central Manitoba.
