Farmers expected to enjoy even higher prices for corn, wheat By Feiwen Rong and Chia-Peck Wong Bloomberg Friday, December 8, 2006
SINGAPORE — Rising investment interest and demand from alternative fuels will drive corn and wheat higher next year at a time when inventories are the lowest in more than 20 years, according to a report by a leading U.S. bank.
JPMorgan Chase recommended corn and wheat, along with gold, as the best opportunities among commodity investments in 2007.
Corn prices have risen 83 percent in the past year. The commodity reached a 10-year high at the end of November after hot, dry weather in July reduced U.S. output, and demand for the grain to make ethanol rose to a record. Wheat prices are up 67 percent in the past year, reaching $5.57 on Oct. 17, the highest since 1996.
Still, corn prices will reach an average $4.03 a bushel next year compared with an average $2.51 this year, while wheat will rise to $5.13 a bushel from $3.95 in Chicago, JPMorgan said.
The U.S. ethanol industry is estimated to "call for an additional 500-1,000 million bushels a year of corn to meet demand," said JPMorgan analyst John Normand. Output will expand on subsidies and a will to wean the nation off dependence on foreign oil, regardless of rising feedstock costs and falling oil prices.
Global wheat reserves will fall to 118.8 million tons on May 31, the lowest since 1982, because Australian production will drop 57 percent to 10.5 million tons and U.S. output has declined 14 percent. Corn stockpiles before next year's harvest will fall to the lowest since 1984, according to the U.S. Department of Agriculture.
