Corn prices on Wednesday surged above $7 a bushel for the first time, pushed higher by Midwestern rains that have flooded fields and left farmers with the prospect of a significantly smaller crop.
Corn's jump—its fifth consecutive record in as many days—means more headaches for consumers, who can expect higher beef, pork and chicken prices as livestock owners are forced to cope with higher costs for corn-based animal feed.
"If we don't get better weather, corn prices could explode higher," said Vic Lespinasse of GrainAnalyst.com. "Some areas need to be replanted but the problem is that it's too late to replant because the corn will be pollinating during the hottest period of the year."
Corn futures for July delivery rose 30 cents, or 4.5 percent, to $7.0325 a bushel at the Chicago Board of Trade, the maximum daily price change allowed by the exchange. Most-active futures, which gained 8.6 percent last week, have jumped 78 percent in the past year on record demand for feed and biofuels.
About 60 percent of the corn crop in the U.S., the world's largest grower and exporter, was in good or excellent condition as of Sunday, down from 63 percent the previous week, the USDA said in a Monday report. A year earlier, 77 percent got the highest rating. Iowa, Illinois, Nebraska, Minnesota and Indiana, the five top-producing states, reported declines.
U.S. corn production is expected to reach 11.7 billion bushels this year, a 10 percent drop from last year's crop, the USDA said in a report Tuesday. The government cut its yield forecast for corn by 3.2 percent, to 148.9 bushels an acre, from 153.9 predicted last month and 151.1 for last year's crop. The reduction reflects "persistent heavy rainfall across the Corn Belt," the USDA said in the report.
"The cut in yields this early in the growing season was a shock," said Roy Huckabay, an executive vice president at the Linn Group in Chicago. "We have to start rationing supplies."
Flooding has also pushed soybean prices to near-record levels. Soybeans for July delivery rose 70 cents, to settle at $15.165 a bushel on the CBOT, not far from the all-time high of $15.96 a bushel.
CORN RALLY
June 11 - U.S. corn futures hit an all-time high on Wednesday after the U.S. Agriculture Department lowered its yield forecast for 2008 due to wet weather hampering development of the crop.
The rally pulled up other commodities such as rice, soybeans and wheat and led to a jump on European grain markets.
Chicago corn futures for delivery in July 2009 rose as high as $7.35 a bushel in Asian trade on Wednesday, a new record. It was the fifth trading day in a row that corn has hit a record high.
Corn has hit successive all-time highs this week on fears that production in the United States, the world's top supplier of the grain, may not meet growing demand due to wet weather and a slow pace of planting.
The latest rally was sparked after the USDA on Tuesday cut its forecast for the average U.S. 2008 corn yield to 148.9 bushels per acre, down sharply from its May figure of 153.9.
As a result, the USDA lowered its corn production estimate to 11.7 billion bushels, down from 12.1 billion in May and down 10 percent from last year's crop.
"It's now become clear that this year's corn production will be insufficient," said Nobuyuki Chino, president of Unipac Grain Ltd in Tokyo.
Chino said it was shocking to see the yield figure fall below 150 this early in the season, and that an improvement in corn production was unlikely from this point.
"(Such a poor figure this early) raises strong worries that the situation is going to get worse," he said.
Sean Corrigan, chief investment strategist at Diapason Commodities, said U.S. corn futures could move towards $8 a bushel and that the market did not seem ripe for a downward correction quite yet.
"Just looking at the technical pattern, it ($8) is well within the bounds of credibility if this move has legs," he said. "I think it's premature yet to say the market is over-cooked."
By 1306 GMT, the Chicago July 2008 corn futures contract was trading at $6.83-1/2 per bushel, up from the previous day's close of $6.73-1/4.
BOOSTS OTHER GRAINS
European grain markets followed the rally on U.S. futures and anticipated a new jump at the open later in the day.
"If you look at the corn price, wheat can only rise. We can't have wheat cheaper than corn," a European trader said.
By 1227 GMT, the benchmark November wheat contract was up 6.75 euros or 3.5 percent at a session peak of 199.00 euros a tonne.
The CBOT July wheat futures contract was trading at $8.17 per bushel, up from the previous day's close of $8.09.
The CBOT July soybean futures contract gained 1.1 percent at $14.63 per bushel, after closing the previous day at $14.46-1/2.
It was not immediately clear if washed-out corn fields would really translate into more soybean acreage, as farmers may want to cash in on record prices above $6 a bushel, Chino said.
Protests by farmers in Argentina -- the world's third-largest exporter of soybeans after the United States and Brazil -- over a soy export tax are also seen as a possible threat to global supplies.
The July rough rice contract was also 1.4 percent higher at $19.7 per hundredweight after falling the previous day in reaction to a surprise increase in the domestic old-crop ending stocks estimate
The rally pulled up other commodities such as rice, soybeans and wheat and led to a jump on European grain markets.
Chicago corn futures for delivery in July 2009 rose as high as $7.35 a bushel in Asian trade on Wednesday, a new record. It was the fifth trading day in a row that corn has hit a record high.
Corn has hit successive all-time highs this week on fears that production in the United States, the world's top supplier of the grain, may not meet growing demand due to wet weather and a slow pace of planting.
The latest rally was sparked after the USDA on Tuesday cut its forecast for the average U.S. 2008 corn yield to 148.9 bushels per acre, down sharply from its May figure of 153.9.
As a result, the USDA lowered its corn production estimate to 11.7 billion bushels, down from 12.1 billion in May and down 10 percent from last year's crop.
"It's now become clear that this year's corn production will be insufficient," said Nobuyuki Chino, president of Unipac Grain Ltd in Tokyo.
Chino said it was shocking to see the yield figure fall below 150 this early in the season, and that an improvement in corn production was unlikely from this point.
"(Such a poor figure this early) raises strong worries that the situation is going to get worse," he said.
Sean Corrigan, chief investment strategist at Diapason Commodities, said U.S. corn futures could move towards $8 a bushel and that the market did not seem ripe for a downward correction quite yet.
"Just looking at the technical pattern, it ($8) is well within the bounds of credibility if this move has legs," he said. "I think it's premature yet to say the market is over-cooked."
By 1306 GMT, the Chicago July 2008 corn futures contract was trading at $6.83-1/2 per bushel, up from the previous day's close of $6.73-1/4.
BOOSTS OTHER GRAINS
European grain markets followed the rally on U.S. futures and anticipated a new jump at the open later in the day.
"If you look at the corn price, wheat can only rise. We can't have wheat cheaper than corn," a European trader said.
By 1227 GMT, the benchmark November wheat contract was up 6.75 euros or 3.5 percent at a session peak of 199.00 euros a tonne.
The CBOT July wheat futures contract was trading at $8.17 per bushel, up from the previous day's close of $8.09.
The CBOT July soybean futures contract gained 1.1 percent at $14.63 per bushel, after closing the previous day at $14.46-1/2.
It was not immediately clear if washed-out corn fields would really translate into more soybean acreage, as farmers may want to cash in on record prices above $6 a bushel, Chino said.
Protests by farmers in Argentina -- the world's third-largest exporter of soybeans after the United States and Brazil -- over a soy export tax are also seen as a possible threat to global supplies.
The July rough rice contract was also 1.4 percent higher at $19.7 per hundredweight after falling the previous day in reaction to a surprise increase in the domestic old-crop ending stocks estimate
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