WSJ reports corn producers have gotten a holiday gift in the form of rising prices, but that rally is a lump of coal for one big corn customer, the ethanol industry. Corn's rally also comes as crude-oil prices sag, something that has put even more pressure on profit margins in an ethanol industry in which many producers already were in a precarious state, with multiple factory closures, analysts say. The price of the corn futures contract for March delivery has climbed to as high as $4.26 a bushel Tuesday on the Chicago Board of Trade from $3.0925 on Dec. 5. It closed Friday at $4.1075. Analysts are befuddled by the rally, saying there is no good fundamental answer. Dry weather limiting South American corn production, concern about enough acres being planted in 2009 and even traders following their so-called technical charts all have been cited, but many analysts say weak demand isn't going away amid a world-wide recession. Michael Swanson, senior agricultural economist for Wells Fargo, and other analysts point out that rising prices typically limit demand, and so in that sense the rally has been counterintuitive. "I think this market is going to get disciplined," Mr. Swanson said. On the ethanol end, producers extract value out of each bushel of corn by selling the fuel and a byproduct, dried distiller grains. Mr. Swanson says corn prices are too high to allow the 80 cents left over from the sale of each bushel that the "very best" ethanol factories need to cover chemical, labor, handling and depreciation costs, let alone the $1.20 a bushel an average factory needs.
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