World View

One day last month – a typical day – the USDA estimated that because of heavy rains this year, corn yields would be lower than expected.  That sent corn prices soaring in Chicago, and stock prices of food companies (such as Tyson and Kraft) falling.  But shares in farm equipment companies (such as John Deere) and seed companies (such as Monsanto, DuPont) went higher.  And of course such gyrations affect the investments of millions of people and organizations…

Conventional wisdom is that because corn prices are higher, farmers will plant even more next year.  That means less acreage devoted to beans, wheat and other crops, so those commodity prices rise.  It also means farm ground becomes more valuable, which affects land prices, which affects assessed values, which affects property taxes and then government receipts.  Of course, higher grain prices also mean higher food prices, higher livestock prices, higher ethanol prices – which affects companies from Safeway to McDonald’s to Exxon.

And if affects the decisions of governments in China, Russia and elsewhere:  How much corn will we import?  What price will we pay?

Years ago, GM president Alfred Sloan remarked that “What’s good for General Motors is good for America.”  I honestly believe the same could be said about corn.  Corn might grow here, but the impact isn’t just an Iowa or a Midwest or even an American thing.  It truly is a world thing.


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