Finally some good news: Corn prices are dropping!


As I mentioned a couple of weeks ago, this year's flooding in the Midwest destroyed a lot of the corn crop. This, combined with the high existing demand for corn and the emergence of ethanol, sent corn futures soaring into the stratosphere as investors envisioned a massive corn shortage. Analysts began calling for a withdrawal from ethanol, pundits predicted apocalyptic scenarios and I began imagining a day when Cap'n Crunch could go as high as $10 a box. It was a dark and gloomy time.

Now, however, things are looking brighter. To begin with, it looks like the crop damage wasn't as bad as expected, and only about 9% of the corn crop was wiped out. While a terrible loss, analysts are arguing that a strong harvest could help overcome this loss. Even better, the Agriculture Department has discovered that, spurred by rising corn prices, farmers planted over a million more acres of corn than previously expected.

In light of this information, the ethanol industry is clamoring for its share, arguing that the corn harvest could more than fulfill its needs. While it's nice that corn, and all its derivatives, aren't going to get ridiculously expensive, this might be a good time to take a deep breath, reconsider our dependency on this crop. With trash-based biofuels and cellulosic ethanol developing as viable alternatives, do we really need to use corn to fill our gas tanks?

Bruce Watson is a freelance writer, blogger, and all-around cheapskate. He's got a bad feeling about all corn dependency that we're building. Somehow, it reminds him of when he started smoking...