LONDON (Dow Jones)--Corn prices have soared this season on the ethanol craze, but while analysts are cautious at the higher levels, few expect corn to follow in sugar's footsteps by suffering a sharp correction. ...
Chicago Board of Trade nearby corn futures shot up to a 10-and-a-half year high of $4.37 a bushel in February. And in response, U.S. farmers say they intend to plant 15.5% more corn this year, a 44-year high of 90.5 million acres.
Stephen Previs, a London-based analyst with investment bank Jefferies International Ltd., says corn and sugar are "different animals." While he is bearish on sugar, he is still bullish on corn due to growing food demand in emerging markets such as China. Ethanol's influence on corn is "like throwing gasoline on a campfire," he said.
Previs warns the U.S. needs near-perfect weather to grow the corn it needs to meet food and fuel demand but seeding is starting later than average due to wet and cold weather, which lowers production potential. CBOT corn could jump to $6/bushel to $7/bushel if there is a weather problem in the U.S. this summer, Previs said.
U.S. farmers plan to switch to corn at the expense of soybeans and cotton, leading to smaller supplies of those commodities. And higher corn prices are having a spillover effect on beef and pork values due to higher feeding costs.