Speculators driving US corn market, full impact of corn prices yet to hit consumers

Tim Jergenson, Barron County's agricultural agent, says most area farmers' corn was contracted six to 12 months ago at a price he estimates to be between $4 and $5 a bushel. Corn is selling for around $7 a bushel right now.

Corn prices have tripled in the past two years, according to a June 22 London Times Online article. Author Dominic Rushe attributed the spike to ethanol, floods, and maybe God's apocalyptic hand, in that order.

It's more complicated than that, say local agriculture experts. Randy Bina, general manager of the Barron County grain merchandiser United Ag Services, believes several other factors are contributing to record prices.

United Ag Services has the largest grain storage facilities in the county. They help farmers contract grain by buying grains for less than market price and storing them, then "shopping" the grains for farmers.

Trade on the Chicago Board of Trade determines the world market price for grains, and corn prices in Barron County move with that figure by the second, Bina explains.

Ethanol production is often blamed for driving up grain prices, but developing countries' increased demand for meat, and therefore the grains that feed livestock and poultry, adds to the overall demand for corn, says Bina, and the weak value of the dollar means American consumers competing in a global market must spend more to get less.

Although he says there's no way to quantify it, Bina personally believes market speculators-the same people allegedly driving up oil prices-are investing in commodities and causing prices to rise.

Minnesota market analyst Chris Steinhoff, of Country Hedging Inc., the commodities brokerage division of the national farmer-owned cooperative CHS, confirms that more investors are choosing commodities because "recent returns make it attractive."

Jennie-O Turkey Store, headquartered in Barron, is the county's largest buyer of corn. Grain buyer Gary Byl, of Rice Lake, agrees with Bina's assessment of the current market situation. He won't divulge how much area farmers will be paid for their contracted corn, but he says corn is "highly overvalued" at current prices, and market volatility, which has also increased fertilizer prices, isn't good for agriculture-or consumers.

"Index funds are pushing this market. The consumer hasn't even seen seven-dollar corn hit supermarkets. Just about every species of meat animal is being curtailed somewhere, some way," he says.

Byl won't say exactly how much corn Jennie-O has contracted this year. It's a "large amount" of what the company will require for feed, he says, but since the company enters into contracts with farmers on an ongoing basis, he anticipates rising turkey prices will hit grocery stores in the future.