Corn Goes Interstellar Too!

Corn has gone into inter-stellar orbit today also! Apparently, this immense rally is being driven today (above chart, 3 minute and tick) by a surprise drop in crude oil inventories, and crude oil prices have rocketed to new all-time records today. This concern for fuel is driving prices for grains higher, as demand for biofuels has re-emerged, driving alternative fuels much higher still. Whoa there!

Corn Daily Chart -- There is no exploding bubble here!

New Record for Oil -- Way Over $111!

Crude oil prices have exploded higher again today, dragging gold prices with them, due to a surprise draw down in crude oil inventories in the United States. This, in turn, may be one reason for the rapid rise in corn and soybean prices -- biofuels!

What commodity bubble?

Nature Conservancy Study Suggest Biofuels Increase Global Warming

More interesting news released over the weekend indicates that use of biofuels (corn, soybean, and sugar-based ethanol) increases global warming even more than fossil fuels do. How can that be?

With the higher prices of food (like corn and soybeans) that are being driven by the idea of making fuel out of them, more and more forest land around the world is being cut down in order to grow more of these grains. Thus, these forest lands that would have helped alleviate some of the greenhouse effect of carbon-based fuels are being cut down to grow even more ethanol-based biofuels.

This is a particularly stunning development, given that the study was done by an environmental group, the Nature Conservancy. It is an on-going study that will continue to be completed and updated annually.

Resurgent Oil Prices Likely to Drive BIofuels Higher

I am expecting another day of lock limit up activity for soybeans and possibly corn, given the surging price of crude oil once again. Virtually all commodity prices are in recovery and moving higher once again on US Dollar weakness, violence in Iraqi oil producing regions, and continued strong pressures on global grain supplies. The EIA crude oil inventory report, due out at 10:30 EST, may also affect prices of biofuel grains also.

Biofuel Grains UP, Wheat DOWN

Corn and soybean prices are strongly up overnight, whereas wheat has continued its sell-off that has occurred over the past few days. This soybean 30-minute chart tells the story of continued bullish strength in grains, or at least the biofuel ones, corn and soybeans. Soybeans and corn have hit new all-time high prices overnight.

On the other hand, this 30-minute chart for wheat also shows the continued selling of wheat futures over the past few days.

New Grain/Biofuel ETN

A new ETN that capitalizes on the world's grains that are being used as biofuels is the Elements Biofuels ETN. It includes only the agricultural commodities related to biofuels. Of course, much of the price strength in grains and other agricultural commodities is due to their being used as a form of fuel. The Elements Biofuels ETN (ticker: FUE) is currently composed of futures contracts for various agricultural commodities; this current composition is about 45% soybeans/soybean oil, 24.51% sugar, and 21.13% corn. Other biofuel grains make up the balance.