Lehman has been badly beaten down due to its high exposure to the subprime crisis and management’s refusal to make tough choices when it comes to cutting loose assets. Unlike its financial brethren such as Citigroup Inc. (C) or Merrill Lynch & Co. (MER), Lehman has yet to make any large asset sales in hopes of boosting its bleeding balance sheet.

“Investors are unwilling to accept any positive view of the company; management is unwilling to sell out at a deeply distressed value,” Richard Bove, an analyst at Ladenburg Thalmann (AMEX:LTS) wrote, The New York Times reported. “The stage is set for a hostile bid to take over the whole company.”

Lehman shares are down over 75% year-to-date, dragging the firm’s market-capitalization below the $10 billion mark. The stock closed at $14.41 Friday, up $0.69, after settling back down from a high of $15.93 earlier in the day on rumors of a possible investment from Korea’s KDB.

State-controlled KDB could be shopping for American investment bank bargains to expand its global footprint.

“Korean banks could consider acquisitions of overseas rivals as part of investments for the future,” Han Jeong Tae, an analyst at Hana DaeToo Securities Co. in Seoul told Bloomberg News. “Still, their dilemma is how much risk they could take when no one is confident over the soundness of those rivals.”

The news follows several media reports that Lehman Chief Executive Officer Dick Fuld has been searching for an emergency cash boost from an overseas bank. Investors will watch to see if KDB makes a simple investment or an outright purchase.

A spokesman at the Korea Development Bank in Seoul said Friday that the state-run firm “is considering all kinds of options [with respect to] Lehman Brothers,” including an outright purchase, Fortune reported.

Source: Korea’s KDB Could Prove to Be Lehman Bros. Savior

The U.S. Department of Agriculture (USDA) announced yesterday (Tuesday) that the U.S. corn crop could be the second largest in history, despite savage floods that decimated corn-producing regions in the Midwest.

The USDA increased its forecast for this year’s corn harvest to 12.3 billion bushels, up from last month’s estimate of 11.7 billion bushels as “perfect” weather and an aggressive planting schedules helped farmers to recover from June’s floods. If the crop comes in as estimated, it would be just 6% lower than last year’s all-time record crop of 13.1 billion bushels.

The increased forecast helped continue corn’s ease from an all-time high of almost $8 per bushel reached six weeks ago. Corn for December delivery gained 11 cents to settle at $5.28 per bushel in late afternoon trading on the Chicago Board of Trade. The USDA report projects that corn will average $5.40 a bushel for the marketing year that begins September 1.

But some analysts are skeptical of the sunny report and feel a bountiful harvest remains very much in doubt. The USDA estimate is 300 million bushels above average analysts estimates.

“The people I’ve spoken with, their views of the crop are certainly dramatically different than what these yields today say and what the conditions say … they’re much more cautious and much more conservative,” Rich Feltes, director of research for MF Global Ltd. (MF), told a panel discussion on the USDA report, Reuters reported.

Feltes isn’t the only one who feels the USDA report is overly optimistic after the worst flooding in 15 years ravaged Iowa and Illinois – two of the nation’s top corn-producing states.

“The thing that surprised me was the fact they increased harvested acres as a percentage of planted acres,” Tomm Pfitzenmaier, a partner at Summit Commodity Brokerage in Des Moines, Iowa told Bloomberg News. “I talk to people who tell me about how bad their drowned-out stalks are everyday.”

The Ethanol Effect

If supply cannot match the USDA forecast, corn prices will quickly be on the rise again. Those prices will also get a boost from the increased allocation for ethanol production.

The USDA report estimates that corn used for ethanol will increase to 4.1 million bushels this year, or about one-third of the total crop, from 3 billion bushels last year. The number of corn bushels diverted to produce ethanol will likely increase in the years ahead.

“It’s important to note that most of that unexpected production gain was offset by higher demand and the fact USDA pegged ethanol demand at 4.1 billion bushels this year infers to me there will be at least 4.5 billion bushels for the [2009 – 2010] campaign,” MF Global’s Feltes said.

U.S. regulators are also taking a closer look at commodities traders, causing some investors to sell for the time being, which is also putting downward pressure on current corn prices.

“Obviously the USDA has confirmed how nice the crop looks but in the final analysis we don’t think the net yields can be that high,” Gavin Maguire, analyst for E Hedger LLC, told Reuters.

“People are heading for the exits right now and asking questions later and when this ends, grain prices should begin rising,” Maguire said.

Source: Higher Corn Prices Ahead as Overly Optimistic USDA Report Misses the Mark