Trading in corn
Firstly, and to enable you to appreciate the opportunities offered by trading in maize, it is important to refer to a few figures. In fact you should know that corn alone represents nearly 40% of the world cereal production mainly destined for animal feed and the manufacture of bio fuel, the subject of which has recently become very popular, bio ethanol. It is precisely the increase in demand of bio ethanol that makes corn an investment product that increasingly appeals to traders. Also we should note that the United States is currently the largest corn producing country accounting for nearly 60% of the world’s production. Then follows China, the European Union, Brazil and Argentina.
The market on which the world maize production is mainly traded is the CBOT, or Chicago Board of Trade, but also the LIFE (London International Financial Futures and Options Exchange). Some futures contracts and options can also be found on these markets.
Why take positions on corn?
The reason that corn is an interesting product for trading is to be found in its historical prices. Indeed, the past price has shown a general overall increase, sometimes with major increases as in 2007 and 2008 with a rise of almost 125% in only a single year.
The reason for this increase is the fact that stocks of crude oil have been falling at the same time that the demand for energy has been rising. Other factors have also contributed to the rise in the corn price such as natural catastrophes that have ruined a large proportion of agricultural land, together with unfavourable climatic conditions.
Although the corn price fell in 2008, the current problems concerning oil and the climate will probably boost the bio fuel demand, and therefore corn, throughout the world. Now is therefore a good time to take position on this market and benefit from this great opportunity to make excellent profits.
It is important to know that the corn price is indicated in dollars per bushel, a bushel of corn approximately corresponds to 25.4kg on the CBOT market.