Is Corn the New Silver? Not by a Longshot

Silver has had a parabolic move and some are asking if it has now topped. With that there is the natural tendency to try to fill the void with the next market phenomenon. One I have heard lately is Corn. As I sit and wait for the Bernanke to fill us with his wisdom and explain how prices going higher is not inflation, I decided to check this out. Here is what I found.

Silver Wheaton (ticker:$SLW) mined 24 million ounces of Silver in 2010. Recent estimates put the cost per ounce to produce at $8.67 (from Pan American Silver release November 8, 2010), implying the total cost for SLW at $208 million. It is also said that the fuel costs are about 10% of the total cost so put them at $20.8 million. If we now assume that fuel is purchased at $3.5 per gallon and contains 5% ethanol then this implies they used about 300,000 gallons of ethanol to mine that silver. One bushel of corn can produce 2.8 gallons of ethanol so this is equivalent to 106,000 bushels of corn to produce 24 million ounces of silver, or for each bushel of corn used there are 226 ounces of silver produced. With silver trading at about $47 per ounce then a bushel of corn would need to cost $10,625 to be as valuable as silver or more than 1300 times higher than the current $7.70 per bushel.

A little tongue in cheek, hope you enjoyed, now back to the Fed Chairman watch.

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