The most common variety of corn traded on the commodity market is known as field corn, or dent corn. This variety is higher in starch and lower in sugar than table corn, which is another popular variety. Sweet corn is also popular, but field corn is known to account for approximately 70% of the corn grown in the United States, which itself produces over half of the world’s corn. There are around 80 million acres dedicated to its production. 6Corn is traded in commodities exchanges under the ticker code of C, and sometimes traded electronically under the ticker code of ZC.
The most striking feature of corn as a commodity is that it is one of the world’s most versatile agricultural products, with myriad uses and therefore a massive demand. This is why it is sometimes colloquially referred to as ‘yellow gold’
The main commodity exchange for trading corn futures in the United States is the CME Group subsidiary the Chicago Board of Trade (CBOT). In this exchange, corn trading occurs in both open auction and in electronic media, utilising the two different ticker codes mentioned above. In Europe, corn is traded on the NYSE Liffe commodity exchange, which is a purely electronic platform. Other exchanges that trade in corn futures include the Tokyo Grain Exchange (TGE), the São Paulo based BM&F Bovespa, the Marche a Terme International de France (MATIF), the Ethiopia Commodity Exchange and India’s Multi Commodity Exchange.
Corn has a wide variety of applications and so corn options are utilised by many different business markets. Corn is primarily used as a food product for animals, with livestock feed accounting for the largest portion of its market share. Corn is also one of the core ingredients needed for the production of ethanol, which is beginning to be widely used as an alternative to gasoline. Others who trade in corn are companies that process it so that it may be made into starch or corn oil, which can then be used to manufacture food products such as margarine and industrial products like glue or paint.
America is the largest producer of corn, where corn exports are generally seen as making the largest net contribution to the agricultural trade balance in the U.S, and are thus hugely important to the American economy. However, an interesting result of the American dominance of the corn market is that corn prices worldwide are determined by relationships in the U.S market, leaving the rest of the world to adjust accordingly. This allows farmers in countries such as Argentina to plant their own corn after the size of the crop in America has been learned, which results in a dynamic market response to any shortage in American crops. Other countries such as Brazil, Ukraine, Romania and South Africa have all been known to be major corn producers at various points at time, with Japan being the world’s largest importer of corn.
Corn commodity prices can be affected by a wide range of factors, but the two most important determiners of the price of corn options are the weather, as with any agricultural product, and the worldwide trend in energy prices, as a result of corn being used in the production of ethanol. Any overly wet or dry season will limit the yield of the crop that a farmer can harvest, whereas exemplary weather will make yields much larger, decreasing corn’s price. When trading in corn futures contracts, speculators also need to be aware of the viability of alternative biofuels, as although corn based ethanol is currently the cheapest biofuel, the advent of a cheaper alternative will usurp ethanol as the fuel of choice, and the demand for corn will subsequently decrease.
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