Commodity prices spike, then fall - KWWL - Eastern Iowa Breaking News, Weather, Closings

Commodity prices spike, then fall


BLACK HAWK CO. (KWWL)-- Stocks surged Monday to a four month high on news that the "Great Recession" is officially over.  The Dow Jones Average jumped 145 points, the NASDAQ closed 40 points higher, and the S & P 500 gained 17 points.  But it wasn't all positive news in the markets.

While futures for corn ended the day with slightly lower prices, spikes overnight led to big jumps in the market.  Around noon Monday, corn prices came close to hitting a two year high.  Soybean prices have also been creeping higher. We explored the reasons behind the spikes.

While fall harvest in Iowa is off to a pretty good start, the corn crop is not shaping up as nicely in other parts of the country and the world.  And that's created a volatile market with corn, wheat and bean prices ticking up.

Golden corn stalks came rolling through the arms of a combine in a Hudson field on a calm Monday afternoon.  But far from the fields, the trading room floor in Chicago has been a buzz with fears of a weaker than expected harvest.

"A lot of it has to do with the USDA report that came out about three weeks ago.  And the average bushels per acre was 165 bushels and they down-graded that to 162.  It doesn't seem like a lot, but when you compare that to last year's crop, there's some concerns," said Scott Adkins, broker with PFG Best in Cedar Falls.

Those lower numbers come on the heels of a time when there's already an increased demand for US corn.

"The exports for the corn market have been strong because we have a weaker than normal US dollar.  A lot of that has to do with the fact that there's some cold weather in China and Canada, a little bit of freeze going on, combined with the drought that's happening in Russia.  All those things play into the need for proteins.  So the world demand for corn is pretty high right now," Adkins said.

In the bigger picture, if corn and other commodity prices stay high, it could be more money in the farmer's pocket now.  But it could also lead to increased costs of grain used to feed livestock.

"I think you'll probably see a shift in proteins if we keep getting these higher prices.  If they're chicken farmers, if they're feeding bean meal, maybe make a switch to some corn, which is a little cheaper, to keep their prices from going too high," said Adkins.

If that feed for animals ends up costing more, it could eventually mean you pay more for animal products.  But right now, experts say not to worry.  The market's show some signs of calming down, and it would take continued spikes in commodity prices to have an affect for the everyday consumer.

It also turns out that the bad vibes on Wall Street have been helping drive up commodity prices.  Investors worried about putting their money into traditional stocks have been turning to the commodity market, spiking those corn, bean, wheat and gold prices.

KWWL Reporter:  Kera Mashek



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