CHICAGO U.S. corn futures surged to a 9-1/2 month peak on Monday as a worsening drought in the U.S. Midwest severely stressed crops as they pollinated, a critical stage of development which, if inhibited, can result in sharply reduced yields.
Soybeans climbed to their highest point in nearly four years on a continuous chart, propelled by strong export demand and the stressful U.S. weather, but prices slipped from earlier highs amid very thin trade as revised midday forecasts suggested slightly wetter weather.
Wheat jumped to a 9-1/2 month high, buoyed by its own tightening supply balance with the outlook diminishing for crops in regions such as the Black Sea, while the surge in corn prices could lead to increased volumes of wheat being used for animal feed.
Grain markets remained focused on a deepening drought across much of the U.S. Corn Belt.
Storms over the weekend brought light and isolated rain to parts of the Midwest, but much-needed precipitation missed a large portion of the region. Temperatures were forecast to remain in the 90 to low-100 degrees Fahrenheit range (32-38 degrees Celsius) for most of this week.
"The weekend rains were a little disappointing. It looks like the heat's going to stick around for another four or five days," said Alan Kluis, president of Kluis Commodities.
"With rain in August, the soybeans can still come back, but the dryness in corn during pollination can do irreversible damage," he said.
Midday weather models suggested wetter weather in Nebraska, Iowa and northern Missouri next week and rains in the northern Delta and Illinois and Indiana the following week, although the forecast was not conclusive.
"If that model were to be true, crops could improve quite a bit," said Drew Lerner, agricultural meteorologist and owner of World Weather in Kansas City.
CROP CONDITIONS ERODE
U.S. corn condition ratings were expected to decline 5 percentage points in a weekly U.S. Department of Agriculture report at 3:00 p.m. CDT (2000 GMT) on Monday, while soybean ratings were seen falling 3 points, according to a Reuters poll of analysts.
Hot, mostly dry weather in the forecast this week suggests condition ratings will decline further in the next update as well, analysts said.
New-crop December corn on the Chicago Board of Trade rose for the sixth time in seven sessions, adding 21-1/2 cents, or 3.4 percent, to $6.56-1/4 a bushel by 1:18 p.m. CDT (1818 GMT). It was the highest price for that contract since September 2011.
New-crop November CBOT soybeans rose 9-1/2 cents, or 0.7 percent, to $14.37-1/4 a bushel after setting a contract high of $14.55-3/4. The lightly traded front-month contract peaked at $15.42, the highest for a spot contract since July 2008.
Cropcast, a division of MDA EarthSat Weather, told the Reuters Global Ags Forum it had cut its 2012 U.S. corn yield forecast by three bushels per acre to 150.6 bpa and trimmed its soybean yield view to 40 bpa, down 0.6 bushel, due to a hot and dry weather outlook.
The company, which specializes in agricultural weather forecasting, joined several other forecasters that have slashed their crop projections in recent days, including Informa Economics and investment bank Goldman Sachs (GS.N).
Soybean prices received an added boost from USDA's confirmation Monday of a 1.19-million-tonne private exporter sale to unknown destinations, widely believed to be top importer China. It was the fifth largest single-day sale on record and the largest since February.
Wheat prices benefited from the sharp rise in corn and expected tighter supplies as the outlook dims for wheat and maize crops in the Black Sea region.
The International Grains Council cut its forecast for global wheat production in 2012/13 to 665 million tonnes from a previous forecast of 671 million as the outlook for the crop in key exporter Russia deteriorated.
CBOT September wheat rose 8-1/2 cents, or 1.1 percent, to $7.65-3/4 after peaking at $7.74-3/4, the highest level for the contract since September 2011.
(Additional reporting by Nigel Hunt in London, Naveen Thukral in Singapore, Colin Packham in Sydney and Valerie Parent in Paris; Editing by Alison Birrane, Dale Hudson, Jim Marshall and Marguerita Choy)