Corn
Suffering from growing demand pressures as well as terrible weather conditions, corn has seen its price surge over the last few years under Obama’s watch. While the President can’t be blamed for the past summer’s lack of rain–that weather event was the worst drought on record in the last 25 years–the continuation of the nation’s ethanol mandate is certainly keeping prices elevated.
That mandate-which was enacted in 2007–requires that 44% of this year’s U.S. corn crop be turned into ethanol to be blended with gasoline. This amount represents roughly 14% of the world’s total corn crop. This artificial demand pressure coupled with real life growing demand from emerging markets has created a perfect storm for higher corn prices. Throw in a weather supply shock like we had last summer and you have a recipe for sustained record high prices [see also The Surging Demographic Trends Behind Grain Investing].
While they have dipped down since the height of the drought, prices per bushel of corn have more than doubled since Obama took office. Corn could be in for higher prices down the road as the EPA and Obama administration have rejected requests to waive requirements for blending the fuels in the wake of the epic drought.
Natural Gas
Prices for natural gas have cratered since Obama took office, yet the commodity has thrived on the production front. As the hydraulic fracturing and advanced drilling revolution has taken place, the energy industry has been able to unlock a virtual ocean of gas and oil from the United States’ various shale formations [see also Citi’s Energy Outlook For 2013].
According to the Energy Information Administration, U.S. natural gas inventories climbed to an all-time high at the beginning of November. This is the fourth straight year a record high has been hit at this point in the season. Utilities typically build inventories of the fuel from April through October. Those supplies are then used to meet about 25-30% of winter heating demand. Overall, the EIA report showed that total domestic gas inventories climbed by 65 billion cubic feet to reach a record 3.908 trillion cubic feet (Tcf) worth of gas in storage. This eclipses the previous record high of 3.852 Tcf hit back in November 2011.
While there is much debate over just how serious Obama is about natural gas–concerns about increased regulation abound–the President pledged to make domestic energy production a top concern during his reelection campaign. Regardless, the commodity has thrived and will continue to thrive as more utilities switch over to the fuel, its use as a transportation fuel increases and new liquefied natural gas (LNG) export terminals are built.
The Bottom Line
Since President Obama has taken office, a variety of natural resources have done quite well under his presidency. With him winning another term, investors can look for more of the same.
This article was originally written by Aaron Levitt, and posted on CommodityHQ.
