Demand for ethanol driving growth in corn futures: CBOT official

Chicago (Platts)--29Nov2006

Demand for ethanol as an alternative energy source has been a driving
force behind the explosive volume growth in the corn futures market, according
to David Lehman, chief economist and managing director at the Chicago Board of
Trade.

About 15% of the open interest in the corn futures contract, or 1.6
billion bushels, for the 2005-2006 growing season was earmarked for the
ethanol industry, Lehman said at a Futures Industry Association conference in
Chicago. For the 2006-2007 growing season, Lehman expects the ethanol industry
to account for 2.2 billion bushels of corn consumption.

There are 5,000 bushels per futures contract. Average daily volumes in
the corn futures contract in October were up 250% year-over-year, he said.

End-of-season corn stocks, encompassing 2005-2006 are expected to decline
by about 50%. "Some [of the decline] is from ethanol demand and some from
export demand," said Lehman. He noted that 4.2 billion gal of ethanol was
produced in 2005, which was "enough to support a futures contract."

With corn the basis for the production of ethanol, producers have begun
to hedge their needs, putting on positions as far out as the December 2009
contract, Lehman added.

Some of the volume growth in the agricultural complex also coincided with
the move to side-by-side trading on the CBOT whereby orders can be executed on
the floor of the exchange or on an electronic platform.

"A lot is being driven by volatility across the commodity complex,"
Lehman said.

--Linda Rafield, linda_rafield@platts.com

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