Monday, December 03, 2007

Why Corn Prices Will Fall

From a NYTimes article on OPEC's dilemma over whether to raise production:
"At the same time, new supplies are slowly making their way on the market. New oil and natural-gas liquid production from OPEC nations could reach 2 million barrels a day next year, and another 1.1 million barrels a day are expected to come from non-OPEC sources, like Russia or Norway, according to estimates by Deutsche Bank. Some OPEC specialists say these factors could substantially alter the balance between supply and demand after years of market tightness."
If the economy slows in the U.S. and more production comes on line and Iraq gets a hair closer to normality, the price of oil will drop more than the $10 it has already. That means ethanol is less attractive. That means corn prices drop.

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