Corn Rises as Record Oil Prices Boost Demand for Ethanol

Oct. 29 (Bloomberg) — Corn rose for a third straight session to the highest this month as record oil prices boost demand for ethanol made from grain.

Corn reached a 10-year high Feb. 26 on forecasts that record consumption of ethanol made from corn would cut global reserves to the lowest since 1984. Crude oil today rose above $93 a barrel in New York for the first time after Mexico shut a fifth of its production because of a Gulf storm. Ethanol has gained 17 percent since falling to a two-year low on Sept. 26.
“People are buying corn because of the record crude-oil prices boosting demand for ethanol,” said Gregg Hunt, a market analyst for MF Global Ltd. in Chicago. “The rally in corn continues to surprise,” because the U.S. government says this year’s crop will be the biggest ever.

Corn futures for December delivery rose 4.5 cents, or 1.2 percent, to $3.765 a bushel at 10:01 a.m. on the Chicago Board of Trade, after reaching $3.7875, the highest since Sept. 28. Prices rose 0.5 percent last week, the third straight such gain. Before today, most-active futures had fallen 17 percent since reaching a 10-year high at $4.5025 in February after farmers boosted acreage to the highest since 1944.

U.S. farmers are harvesting a record crop of 13.318 billion bushels, up 26 percent from 2006, the Department of Agriculture said Oct. 12.

Bloomberg