Corn futures have increased 17% in three days. The US–the worlds largest producer and exporter of corn, expects its third biggest harvest ever.
Everyone thinks corn is popping now because the USDA reduced the expected yield for this year’s harvest. Bunk. Corn is popping for one reason–too much money, particularly dollars. Supply and demand is not anywhere near 17% out of whack in just three days time. Demand for agricultural commodities like corn just don’t change that quickly, and while supplies might be a little tighter this year than last, primarily due to problems in the Russian wheat harvest, the crop is still expected to be the third largest ever.
But get ready for the obligatorily dire reports tinged with journalist fervor that this may really get bad, like things were really gonna get bad in 2008 with the rice harvest. But all those apparently bad tidings were just a monetary illusion. Just as they are now. Next will be oil prices. Then things will really seem to be spiraling out of control.
Not to fear. The higher the prices get now, the lower they’ll go when it is realized there was no expansion in demand that was driving them higher, it was just an expansion in money. Just like happened in 2009, after the run-up in 2008.
Ho hum. The economic cycles are turning so quickly nowadays until it always feels like groundhog day.