Corn and soy soar on hot, dry U.S. weather
CHICAGO (Reuters) - Corn and soybean futures hit their highest levels in a month on Tuesday as hot and dry weather in the U.S. Midwest crop belt threatened prospects for a bumper harvest that the global grain trade is counting on to replenish inventories.
Wheat followed corn higher, with worries about disappointing Russian grain crops lending support.
At the Chicago Board of Trade, new-crop corn futures for December delivery posted the biggest gains, rising 5.5 percent, or 29-1/2 cents, to settle at $5.63-1/2 per bushel after hitting a three-month high at $5.64.
December corn has risen 11 percent this week, the biggest two-day rise in the life of the contract.
Commodity funds helped drive the market higher, buying an estimated 40,000 corn contracts over the last two sessions, CBOT traders said. The buying spree suggests funds have turned bullish on corn after the latest weekly report from the U.S. Commodity Futures Trading Commission showed funds holding a small net short position in corn as of June 12.
Tuesday's advance came a day after the U.S. Department of Agriculture reported a larger-than-expected decline in weekly U.S. corn and soybean condition ratings, and as weather forecasts raised fears of further downgrades.
"It will be dry in roughly half of the corn and soybean belt; no doubt there will be further deterioration for at least the next two weeks," said Don Keeney, meteorologist for MDA EarthSat Weather.
In its weekly crop report on Monday, USDA said 60 percent of the U.S. corn crop was rated in good to excellent condition, down 3 percentage points from the previous week, while analysts had predicted a 2-point drop.
USDA also said 5 percent of U.S. corn had begun silking, an indication that the crop had reached its reproductive stage. Stressful weather during this phase can have a significant impact on yields.
Corn stockpiles in the United States, the world's biggest supplier, are projected to hit a 16-year low this summer. But the USDA has projected a record-large U.S. harvest this autumn of more than 14 billion bushels, and a doubling of stocks by the summer of 2013.
The current dry spell threatens that harvest. The USDA has projected an average U.S. corn yield for 2012 at 166 bushels per acre, but with the drop in ratings, private forecasts are falling closer to 160 bushels per acre.
"We would not be this high on corn (futures) if we did not have the crop shrinking from lofty expectations," said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.
"The government is carrying corn (yield) at 166. From the condition ratings, that is too high," Roose said.
Front-month July corn ended up 13 cents at $6.12-1/2 after hitting $6.17, the highest spot corn price since May 22.
Analysts said gains in nearby July corn trailed those in the new-crop months due to slowing demand for cash corn from domestic ethanol plants. Trade reports said a Nebraska ethanol plant suspended production for spring maintenance.
EXPORT DEMAND FOR SOYBEANS
In soybeans, nearby contracts led the gains. Front-month July drew support from a sale of 140,000 tons of U.S. soybeans to unknown destinations reported by the USDA. The soybeans were scheduled for delivery in the current "old-crop" marketing year that ends August 31, underscoring strong export demand for U.S. soy after a drought slashed the South American harvest.
CBOT July soybeans ended up 49-1/2 cents, or 3.6 percent, at $14.33-3/4 a bushel, while November soybeans rose 45-1/4 cents, or 3.4 percent, to $13.84-1/2 after "gapping" higher at the open.
Deferred soy contracts rose on U.S. weather worries. USDA said 56 percent of the U.S. soybean crop was in good-to-excellent shape, down 4 points from the previous week.
Analysts also cited fears that U.S. farmers could scale back the last of their soybean planting. Most of the soy crop is in the ground but dry weather has stalled the sowing of so-called "double-crop" soybeans, which are planted immediately after the harvest of winter wheat, on the same fields.
"Clients in Kansas and Indiana - any areas that are dry right now that would be double-cropping (soy) after wheat harvest - are holding back," said Mike Zuzolo, president of Global Commodity Analytics in Lafayette, Indiana.
"This weather is starting to impact the beans with almost a multiplier effect, because of the acreage and the yields both being hit," Zuzolo added.
WHEAT ALONG FOR THE RIDE
Wheat followed corn higher, with additional support stemming from a smaller Russian crop forecast.
CBOT July wheat settled up 19-1/4 cents, or 3.1 percent, at $6.49-1/2 per bushel.
SovEcon Chief Executive Andrei Sizov Sr. said he forecast Russia's 2012/2013 grain harvest at 85 million tons, down from 89 million tons about a month ago, and the wheat crop at 50 million tons, down from 53 million previously.
(Additional reporting Colin Packham in Sydney, Ivana Sekularac in Amsterdam and Sarah McFarlane in London; Editing by Marguerita Choy and Jim Marshall)