U.S. corn futures topped out at record highs on June 11 on the news that the impact of flooding in the Midwest would hurt this year's corn crop, but the June 11 "CBS Evening News" left out one significant detail in its reporting about the crisis.
"[A]gricultural disaster aid has been requested for Iowa, Illinois, Wisconsin and Michigan," CBS correspondent Cynthia Bowers said on the June 11 "Evening News." "The federal government estimates that this year's corn crop will be 10 percent lower than last year's. That's down 1.4 billion bushels, and it's too late to do much about it."
According to a Reuters story, corn prices on the Chicago Board of Trade have shot up 80 percent in the last 12 months, with almost 17 percent of that just this month. But Bowers didn't explain how the prices got so high before the floods, which put consumers of corn products in this vulnerable position. Corn futures were already priced high because of a heightened demand - artificially stimulated by federal government subsidies for ethanol produced from corn.
"As a result [of the flooding], corn is trading at all-time highs - up 52 percent for the year, topping $7 a bushel," Bowers said. "And analysts say it's headed for $8 [a bushel] - costs that will soon be passed on again at the grocery store where consumers are already paying more for anything with the word ‘corn' in it."
One futures analyst predicting corn at $8 a bushel directly blames ethanol mandates from the U.S. government and the recent moves of the price of crude oil into record territory.
"I believe a reasonable target for corn by the end of this year is $8, which would largely be dictated by price movements of the U.S. dollar and crude oil," Carol Hurley, a senior market strategist with Lind-Waldock, a futures brokerage service, wrote for Insidefutures.com on June 11. "If crude oil continues to rally, that will naturally push corn higher because of ethanol mandates by the U.S. government."