Corn futures drop to $4.08, down almost half from summer high

In Chicago, the December futures contract for corn dropped to $4.08, down almost half from July, when corn futures peaked at $7.99, despite the increased ethanol demand from the Renewable Fuel Standard.

According to Alan Kluis, writing in agriculture.com, “Prices went too high…Weather conditions improved, and U.S. crop yield potential increased dramatically from mid-June to early August…Corn and other grain markets had been pulled higher by the crude oil market…The U.S. dollar, which had been collapsing lower, suddenly turned higher in early August.” The normal drop in corn prices is 20 to 22 percent from a June high to an October low; this year’s correction was 50 percent.

The dramatic drop has silenced voices earlier this year, pinning blame on the Renewable Fuel Standard for the rise in corn prices, and vindicates the decision now to waive the Renewable Fuel Standard to relieve corn prices. However, observers point out that farmers are facing a loss on corn if prices do not stay above a $3.50 to $4.00 breakeven point.

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