Bloomberg News

Corn Jumps to Record as Worst Drought in Decades Hurts U.S. Crop

July 30, 2012

Corn rose to a record in Chicago, heading for the biggest monthly gain since 1988, as the worst drought in at least a generation lingered in the U.S., threatening yields in the world’s biggest grower and exporter.

Iowa, Illinois and western Indiana had less than half of the normal amount of rain in the past 30 days, National Weather Service data show. The Midwest may be mostly dry with only “scattered light showers” until the weekend, when storms bring 0.5 inch (1.3 centimeters) to some areas, Telvent DTN said. Analysts including Goldman Sachs Group Inc. and Macquarie Group Ltd. have said yields probably will trail government estimates after heat and dry weather intensified as plants matured.

Crop conditions are “incredibly variable,” Chris Gadd, a Macquarie analyst who recently concluded a five-day tour of U.S. fields, said by telephone today from London. “There are patches where it’s terrible and patches where it looks very good. The early-planted corn looked significantly better than anything that was planted later, because most of it managed to go through pollination prior to the heat arriving.”

Corn for December delivery climbed 2.9 percent to $8.1625 a bushel on the Chicago Board of Trade by 12:43 p.m. in London. The grain earlier reached an all-time high of $8.1725. The most- active contract has surged 29 percent in July.

Deteriorating Conditions

Less than a third of U.S. corn and soybean crops were in good or excellent condition as of July 22, the worst ratings since 1988, a year when severe drought slashed the U.S. corn harvest by 31 percent, Department of Agriculture data show. The agency is scheduled to update its crop ratings today.

At the end of June, moderate to extreme drought covered the largest area of the contiguous U.S. since 1956, according to the National Climatic Data Center. The Midwest drought may spark a rebound in world food costs, the United Nations said July 5.

“There isn’t really any meaningful rainfall for parched areas until the end of the week,” Victor Thianpiriya, an agricultural analyst at Australia & New Zealand Banking Group Ltd., said by phone from Singapore. “It’s not just a corn story at the moment. The other thing that’s playing in the grain market in general is the lack of alternatives.”

U.S. corn yields may be as low as 126 bushels an acre, Goldman Sachs said July 23. The USDA said July 11 yields would be 146 bushels an acre, slashing its projection from a record 166 bushels estimated in June. The USDA will update its crop forecasts on Aug. 10.

Soybean Prices

Soybeans for November delivery gained 2.7 percent to $16.4475 a bushel. The oilseed, which reached a record $16.915 on July 23, is up 15 percent in July.

Wheat for September delivery rose 2.2 percent to $9.175 a bushel. The grain, which can replace corn in feed, has surged 21 percent this month. In Paris, November-delivery milling wheat climbed 2.7 percent to 264.75 euros ($324.56) a metric ton on NYSE Liffe, bolstered by dry weather in Russia.

French Agriculture Minister Stephane Le Foll said in an e- mailed statement July 28 that the surge in grain and soy prices is a “major preoccupation” worldwide, and agricultural leaders may need to hold a formal meeting to discuss the issue if drought worsens in the U.S. and Russia.

“There’s still concerns over the Russian wheat crop,” Australia & New Zealand’s Thianpiriya said. “The substitutes for corn are looking tight as well.”

To contact the reporters on this story: Whitney McFerron in London at wmcferron1@bloomberg.net; Luzi Ann Javier in Singapore at ljavier@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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