According to the Economic Research Service of the U.S. Department of Agriculture, approximately 85% of corn grown in the U.S. is used domestically and 15% is exported. This 15% accounts for about half of global exports.
This is the corn chart over the past 10 years, as I see it. Now, I know that Elliott wave and technical analysis in a food commodity whose basic supply is at least partly dictated by the weather may not be all that valid, but it's still interesting.
Since the start of June, corn prices have skyrocketed in what I believe to be a strong fifth wave - which according to EWI is typically the strongest move in commodities, at least commodity bull markets. They are coming up against strong resistance from the previous highs in 2008 and 2011, so there may be a near-term reprieve, but if this is a commodity fifth wave they probably won't last. On the other hand, there are numerous gaps up on the corn chart that have been created over the past two months' meteoric rise.
What does that mean? Well, as many have already reported, rising food prices. Food has inelastic demand, and the demand increases as the population goes up. I would not be surprised if exports decrease out of sheer domestic need, and for charitable food banks to find their coffers much smaller. This, in turn, is likely to result in mass starvation and civil unrest in many key parts of the globe.
Alternatively, America could try to maintain exports at the expense of internal consumption, which would likely cause domestic food prices (as well as non-food goods that include corn, e.g. high-fructose corn syrup that's in most soft drinks) to soar even more than they otherwise would. This would have the effect of driving even more families to food stamps and thus further amplifying the national debt, bringing us ever closer to the point of no return - assuming we haven't already passed it, which we probably have.
Either way, the drought and the corn rise ostensibly due to it will either result in a new economic contraction or contribute to an ongoing one (depending on how "recovered" you feel the economy has been), which in turn would be the impetus for corn to correct and fill its gaps up in speculative outflow - along with a precipitous decline to at least 1125 in the stock market.
