Unusually hot and dry weather across the corn growing areas of the United States has led analysts to sharply revise down yield forecasts for the year. The United States is the world’s largest producer and exporter of corn in the world.  According to the United Nation’s data on world food production, in 2009 the Unites States produced 40% of the world’s total harvest. In addition, production of corn is heavily concentrated in a region which is known as the “Corn Belt”. This region is located in the Mid-Western Region of the United States and includes states such as Iowa, Illinois, Indiana and Michigan.

 According to US government data, as of July 8^th, drought conditions were the worst for that date since 1988 in the Mid-Western Region. On July 11^th, U.S Department of Agriculture cut its production and inventory estimates by more than analysts had predicted which caused an immediate surge in prices. The CORNSEP12 contract which had been trading on July 11^th at a low of Rs 20.4 climbed to Rs 21.5 by the end of July 12^th (11:45 pm Nepal Standard time). Trading closed for the weekend at Rs 21.9 on 11:45pm N.ST on Friday but has reached Rs 22.7500 as of 12:00 pm Monday the 16^th as trading resumed.

Investors who are interested in Corn should pay particular attention to the weather news in the Mid-West region. Although it would be advantageous to get access to local weather news stations, websites such as weather.com and accuweather.com should provide accurate forecasts and the latest development on the drought. The price climb since July 11^th suggests that conditions have not been improving. Since so much of the world’s harvest originates from this particular region, a continuation of the current weather patterns are likely  to permanently push up the price of corn until the next growing season.