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Corn, Wheat Fall After U.S. Farmers Planted More Than Expected

June 30 (Bloomberg) -- Corn fell the maximum permitted by the Chicago Board of Trade and wheat dropped the most in 13 weeks after the government said U.S. farmers planted more of both crops than previously expected.

Corn was sowed on 87.3 million acres, up 1.9 percent from a March forecast, and spring-wheat planting jumped 6.8 percent to 14.197 million acres, the U.S. Department of Agriculture said in a report today. Corn prices doubled in the past year to a record on June 27, and wheat jumped 13 percent this month after reaching a record in February. The U.S. is the world's largest corn grower and wheat exporter.

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Corn futures for December delivery fell the CBOT's 30-cent limit, or 3.8 percent, to $7.57 a bushel, the biggest percentage drop since Jan. 23. The most-active contract reached a record $7.9925 on June 27. Corn is still up 26 percent this month, the biggest monthly gain since June 1988.

This is an interesting, although in hindsight not surprising, thing to see. Record prices are bound to attract farmers to plant more of those respective crops, and in this case it was corn and wheat. Most of that corn will probably go to the inefficient, costly, terribly executed ethanol program, and a lot of the wheat will most likely be exported given the shortage of food in quite a few countries. I wouldn't expect corn prices to drop much more, given the nature of the crop (it's a crop that farmers have to rotate every year or two in order to keep the soil in quality shape) it just isn't sustainable and I don't think prices are falling too much more over the next year or so. It's unlikely that the federal ethanol program will be terminated anytime soon (unfortunately), so demand and production will most likely continue to rise. The question is if the corn growers can keep rotating their crops in order to keep the soil at a sustainable level. E10 is a far better way to go because it can be used on the majority of vehicles today and doesn't require any special treatment as does E85. If only the market could figure out such things...