For anyone involved in commodities trading, you will know that corn is in a massive gully. Since 2012 the price has just gone down with no end in sight. If you ever wondered why this was happening, Reuters released an in depth report on the industry’s woes.
Reuters’ article points to the “the bin-busting harvests of cheap corn, wheat and soybeans are undermining the business models of the world’s largest agriculture firms and the farmers who use their products and services. Some analysts say the firms have effectively innovated their way into a stubbornly oversupplied market.” In many ways this echoes the problems of the oil market; this time growing instead of pumping their way out of the problem.
However, the article shows that things will likely not get any better for the foreseeable future:
The seed and chemical giant [Monsanto] projects that western Canadian corn plantings could multiply 20 times to 10 million acres by 2025 – adding some 1.1 billion bushels, or nearly 3 percent to current global production. The question, amid historically high supplies and low grain prices, is whether the world really needs more corn.
The current over-supply issue will likely only be compounded by this new development, meaning that commodity investors should take some time to reassess their portfolios.
To learn the whole story, go to reuters.com. If you found this article interesting, why not sign up for our free newsletter?
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