If you haven't thought about corn lately, you're about to. The worst drought in 50 years has hit the U.S. corn crop, and this is going to have global implications for food prices. The media ink is flowing from the financial pages to the front pages now. In sum: Corn prices are up, big time.
However, for a little more perspective I glanced at corn futures markets. Corn is in a weird pricing situation called “backwardation.” In simple terms, markets seem to be betting that corn will get cheaper in 2013, 2014, and 2015, presumably because speculators expect output to increase. So I'm not freaked out about corn prices yet, since the backwardation is telling me one of two things: Either (a) the smart money is not freaked out either, or (b) something else is going on and I'm too dumb to see it.
Anyway, why all the attention? Because corn is a big deal, and if prices get weird, there's a lot of other stuff that will be dragged into it.
Corn is widely used as cattle feed, so we're going to see an impact on beef prices. Corn is also used to make fuel as ethanol, so there's a fuel price angle here, too. And corn is also used as a sweetener in stuff like soda pop, so, well, you get the big idea here. Corn is everywhere.
When corn has price movements, the prices of substitutes (e.g. rice) and complements (stuff that goes with corn) are also moved.
So if we're going to contemplate a movement in corn, we'll be pulling on a web that spans the globe and is tied to pricing strands in rice, wheat, beef, pork, poultry, sugar, and gasoline, just to name a few things.
Some analysts make entire careers of studying corn and forecasting its prices. I'm not one of them. But I'd sure like to have lunch with one. Corn prices can jump around all over the place, so it must be an interesting industry to be involved with.
For the near term, I think we can safely say that food prices seem more likely to rise than to fall, as the near-term corn crunch works its way to market shelves.
Well, enough of the future. And enough of the present. When it comes to appreciating the magic of corn we must look to the past. Specifically, we must look to the year 1958, when the corn industry, nay, all of mankind, marked a major milestone.
That's when Jiffy Pop was invented.
“As much fun to make as it is to eat,” went the advertising slogan, and it was a popular popcorn snack before microwave ovens hit the scene.
Jiffy Pop was a disposable, self-contained popcorn pan that had popcorn inside and a wire handle attached to the body. Instead of a lid it had a thin foil cover that billowed up when the corn popped. After it was done popping you'd pull apart the crown of the foil, thus making it a popcorn bowl full of crunchy goodness, plus a few chunks of carbon that were burnt kernels.
I can't help but think: Does Jiffy Pop still exist? Are any other graybeards curious about that? You should be. After all, most things from the good old days, like four-barrel carburetors, wind-up alarm clocks, and straight-wall turbojet engines have been tossed onto the scrap heap. The best stuff is “obsolete,” they claim. Too sturdy and mechanical, they say. Not electronic enough, they point out. These days, everything has to be a multi-point-direct-digital-micro-processed-fully-electronic-pain-in-the-butt, otherwise it doesn't sufficiently mesmerize the techno-zombies.
Well, not Jiffy Pop. It was clever and simple at the same time. Clever because it took five years to invent. The foil atop had an intricate shape that kept it flat before use, but which performed the sacred billowing at the magic moment. A true marvel of science. And it was utterly simple to use. You didn't need electricity or appliances. You could cook Jiffy Pop with just a few stray sticks of firewood, and many a camper (me) and Boy Scout (also me) did just that. Now that's an honest food, eh? Food the way nature intended, cooked over the open campfire.
Fortunately, as it turns out, Jiffy Pop is still with us. According to the ConAgra Foods website, Jiffy Pop “Offers a fresh, homemade taste that no microwave popcorn can match.” I don't know why I like that line, but I do.
Anyway, if you're really worried about corn prices, you can buy futures in it. Or options on the futures. Or an ETF (Exchange Traded Fund) in it. Me, I think I'm going to go long Jiffy Pop. That way, no matter what happens, I can at least eat the inventory.
Visit Ed Stephens Jr. at EdStephensJr.com. His column runs every Friday.