Rains Help Corn - and Ethanol

As the corn crop rebounds, ethanol producers are enjoying lower corn prices.

Published on: Jul 30, 2007

Recent rain in the Midwest has helped the corn crop rebound - and, to the delight of ethanol producers, it has driven down corn prices.

After as much as 6 inches of rain in eastern Iowa and western Illinois, much of corn crop received relief after a dry June.

In mid-June, a little more than half of Illinois' corn crop was in good to excellent condition, according to USDA's crop reports. Last week, that figure was 81%. In Iowa, it was still healthy at 63%, held down by dry conditions in the western end of the state.

Corn prices hit $4 a bushel in February, but cash-market corn has lowered to around $3.

"You can make very good returns at $3 corn," says Dave Nelson, chairman of Minneapolis-based Global Ethanol LLC, which has plants in Iowa and Michigan. "When it gets to $4, it gets pretty tight."

"A meaningful decline in corn prices would suggest the potential for improving profitability and drive ethanol stock prices up," Citibank analyst David Driscoll, who expects corn prices to level off at $2.75 a bushel in the long term, wrote in a note to investors.

Source: Associated Press