Corn prices are soaring in the U.S.

By lowering by four percent of its corn crop 2010 forecast this month, the U.S. Department of Agriculture (USDA) is taking all market players by surprise and is triggering in soaring prices. The poor weather conditions––especially in the Midwest––are one of the explanatory factors. While market analysts were expecting an average yield of 162.5 bushels/acre in October, it only reached 155.8 bushels/acre. This will reduce American stocks to 22.9 million tons from 28.4 million, that is to say the lowest level recorded since 1996.

Market reactions were swift. Corn prices soared and the price of corn bushel came back to its highest levels in two years––increasing by eight percent during the sole morning of October 12 to reach $5.72 in Chicago, within the authorized $0.45 rise. Consequently, corn contracts for December 2010 delivery increased by 15 percent in two sessions.

In spite of the skepticism shown by some American economists who are questioning the credibility of USDA estimates, these soaring U.S. corn prices are in fact demonstrating that

- agricultural price volatility can be staggering and its scope can throw markets off balance;
- it is essential to adopt a safety net to prevent propagation from one market to the next;
- we must coordinate national regulatory measures at the international level, since agricultural markets are now globalized and interconnected.