Corn Surges As U.S. Farmers Contend With Hot, Dry Spell

By Phoebe Sedgman and Whitney McFerron - Jul 2, 2012
Bloomberg
Corn for delivery after the next U.S. harvest rallied to the highest level in more than nine months on speculation a heat wave may hurt yields. Soybeans and wheat also advanced.

The Midwest will be hot and mostly dry in the next five to seven days, with crops in Missouri, Illinois and Indiana most at risk of damage after receiving little rain in the past month, Telvent DTN said today. Temperatures will stay above 90 degrees Fahrenheit (32 degrees Celsius) for much of the region through at least July 7. About 71 percent of the U.S. Midwest is experiencing drier-than-normal conditions, according to data from the University of Nebraska at Lincoln.

“Conditions remain exceptionally hot and dry,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia (CBA), said by phone from Sydney today. “Yield potentials are declining daily and the inventory projections for 2012-2013 season are being cut quite drastically.”

Corn for December jumped 2.9 percent to $6.5325 a bushel by 1:24 p.m. London time on the Chicago Board of Trade. Earlier, the price touched $6.64, the highest for that contract since Sept. 12. Futures surged 15 percent last week.

Goldman Sachs Group Inc. raised its estimates for corn prices in three to 12 months to $6.25 a bushel, up from a previous forecast of $5.25, on the prospect of a smaller-than- expected U.S. harvest. Yields in the U.S. may average 153.5 bushels per acre, less than the Department of Agriculture’s projection for a record 166 bushels, the bank said.

On June 29, the USDA raised its estimate of U.S. corn plantings to a 75-year high of 96.4 million acres, up from a forecast of 95.864 million in March. The expansion didn’t “derail the market’s current concerns over yields,” Morgan Stanley analyst Hussein Allidina said in a report.

Soybeans Climb

Soybeans for November delivery rose 1.1 percent to $14.4275 a bushel, after earlier touching $14.5575, the highest since the contract first traded in June 2009. September-delivery wheat gained 1.2 percent to $7.6625 a bushel, after earlier climbing to $7.7475, the highest for the contract since September.

In Paris, November-delivery milling wheat rallied 1.7 percent to 230.50 euros ($290.22) per metric ton on NYSE Liffe. The grain earlier touched 231.75 euros, the highest ever for the contract, which began trading in March 2011.

Spring drought and winter frosts may cut Russia’s grain and legume harvest to 85 million tons, down from an earlier estimate of 94 million, the Agriculture Ministry said June 26. Russia was the world’s biggest wheat exporter in the 2011-12 season year after the U.S. and Australia, according to the USDA.

“Russia’s crop is down reasonably significantly but the harm to their export potential is quite significant,” Dave Norris, an independent grain broker, said today by telephone from Harrogate, England.

Paris wheat prices nearly doubled in 2010 after drought spurred Russia to ban grain exports, leading importers to increase purchases from suppliers in the European Union and U.S.