It’s been a rough week for the stock market, but that doesn’t mean every asset class is taking punishment. In fact, unlike in May, commodities are actually on the rise.
While we’re still waiting for a big move in metals, energy and agricultural commodities have seen nice gains in recent weeks. In particular, grains have been through the roof, especially corn.
Here’s the deal…
The country’s corn crop is under a vicious assault from record high summer temperatures.
The Midwest is currently experiencing the worst drought since 1988. Conditions are so poor, the US Department of Agriculture (USDA) has declared disaster in 26 states and over 1,000 counties.
America’s crop growing region needs rain badly, yet there are no major rains in the long-term forecast. As such, farmers and investors alike believe this year’s corn crop could be much smaller than expected… unless the weather changes in a hurry.
It’s no wonder the price of corn has skyrocketed.
In mid-June, corn was trading at under $6.00 a bushel. As of this writing, the price has climbed well into the $7.00 range. In just the last month, corn’s up nearly 23%.
To add fuel to the fire, the USDA just lowered the yield expectation for corn from 166 bushels per acre to 146. That’s a huge downgrade, and definitely got the attention of traders.
But it’s not just about farmers and corn traders. The price of corn has far-reaching implications.
Of course, corn is a major ingredient in several types of food and drink. Higher corn prices could translate into more expensive food for everyone.
What’s more, one-third of the corn crop is used for the production of ethanol. Since ethanol makes up 10% of gasoline in the US, corn’s price jump will impact the ethanol industry and may even affect gas prices.
Finally, corn is a significant source of feed for cattle and other livestock. If the price of corn remains high, it can eventually lead to higher meat prices. It’s also something that can impact most of us on a daily basis.
So, what can you do profit from the situation?
As a matter of fact, several penny stock and small cap companies could rise or fall based on their exposure to corn. There are food and restaurant companies, ethanol producers, agricultural businesses, and more.
In some cases, corn’s big move has yet to be reflected in these companies’ share prices. With a little research, savvy investors may be able to find some excellent upside opportunities.
***Editor’s Note*** Just as an FYI, I’m releasing a new penny stock in my Penny Stock All-Stars portfolio later today. This one’s a tiny technical services company that should heat-up as the housing recovery rolls on. Click here for access to the portfolio before I release the name of this stock.
Yours in profit,
Category: Commodity Stocks