25th Jun 2012, by Agrimoney
Corn futures jumped their maximum daily limit, helping wheat soar too, as hot and dry weather, and a forecast for more, prompted further cuts to hopes for the US harvest.
Corn for December delivery locked up the Chicago limit of $0.40 a bushel, taking it to $5.94 a bushel, a 7.2% gain.
The jump, which put the contract on course for its best performance since it launched three years ago, followed an assessment by Rabobank that speculators were poised to inject fresh funds into agricultural commodities onto continued weather concerns.
And the weekend failed to deliver significant rains to parched crops in parts of the Midwest, with forecasts indicating further dryness to come.
Macquarie on Monday released one of the more downbeat forecasts yet for US corn yields this year, of 156.5 bushels an acre, below the US Department of Agriculture's 166-bushels-an-acre figure, and the 158.6 bushels-an-acre estimate from Cropcast last week.
"Dry conditions through out the Midwest, specifically the southern Corn Belt, following the completion of plantings has raised the risk of poor pollination for the US crop," Macquarie said.
"These dry conditions have also been combined with the forecast of below-average precipitation all the way through to pollination," a particularly sensitive period for crop development which has begun in many areas.
'Yield potential on the decline'
Broker US Commodities said: "The market is finding huge support from continued threatening weather," noting that "only about one-quarter of the grain belt had received rain in the last 48 hours", and even then some amounts were as low as 0.25 inches.
"The next 10 days are expected to be warm/dry. The yield potential will be on the decline in the next 10 days," the Iowa-based broker said.
At Martell Crop Projections, Gail Martell said: "Scattered showers broke out in Iowa and Illinois over the weekend, but coverage was very limited."
"There is not enough ground moisture to supply increasing crop needs on the majority of Midwest farms," Ms Martell said.
And while a cooler spell appears to be starting, more moderate temperatures "may last for only two-or-three days before very hot, dry air overtakes the grain belt expanding north and eastward from the Great Plains.
"The six-to-10 day forecast continues threatening for heat and dryness into early July."
'Rethink on supply and price expectations'
Corn's performance helped futures too in wheat, an alternative in uses such as livestock feed, and which got an extra boost too from waning hopes for dryness-tested Black Sea crops.
Russia's farm ministry slashed to 46m-49m tonnes, from 57m tonnes, its estimate for the wheat crop this year, which the US Department of Agriculture estimates at 53.0m tonnes.
And in Ukraine, the state weather centre narrowed to 12.2m-12.3m tonnes its forecast for the domestic harvest, below a USDA figure of 13.0m tonnes.
"Further pressure on grain supplies has come from dry weather affecting the Black Sea producers with downgrades to Russian and Ukrainian wheat crops and dry weather in the North China Plains," Sudakshina Unnikrishnan at Barclays Capital said.
With official Australian forecasters saying climate models continue to indicate the onset of an El Nino weather pattern later this year, "what all this implies is that the optimistic scenario of agricultural surpluses that 2012 was supposed to herald may not transpire," Ms Unnikrishnan said.
"Weather risks both current and potential may cause a rethink on supply and price expectations."
Cattle dip
However, on livestock markets, the US weather fears, coupled with higher corn prices, provided downward pressure on feeder cattle - animals ready for placement on feedlots for fattening.
Dryness saps feeder cattle prices by making farmers more likely to sell animals than carry the cost of buying in fodder, while high corn prices sap demand by cutting feedlot margins.
Feeder cattle for August fell the exchange maximum of 3.0 cents, to 149.80 cents a pound, in Chicago.
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