June 12, 2008 / 4:53 AM / 9 years ago

Corn hits record, soy rallies as floods expand

CHICAGO/LONDON (Reuters) - Corn prices soared to record highs on Thursday as flooding damaged crop prospects in the U.S. Midwest, heightening concern over shrinking stocks and fueling the market’s relentless advance.

Torrential rains have swept across the Midwest, the key growing region in the world’s top producer, resulting in floods which have destroyed homes, as well as thousands of acres of corn and soybeans.

“It’s the worst in recent memory, at a time when demand has never been higher,” said Gavin Maguire, analyst with Iowa Grain in Chicago.

“We have lower (corn) acres to begin with, and now we have to expect a lower yield because of the bad growing season. So it all spells tighter corn supplies down the road,” he said.

More than 30 tornadoes were reported on Wednesday across Kansas, Nebraska, Iowa and Minnesota, some accompanied by baseball-sized hail. Four teenagers at a Boy Scout camp in Iowa and two people in Kansas were killed by tornadoes.

The storms also produced heavy rains of 0.75 to 2.5 inches.

At the Chicago Board of Trade, front-month July corn was up 15 cents at $7.18-1/4 per bushel at midday after reaching $7.25-1/2, a record high for a spot contract.

The deferred July 2009 contract set an all-time high for the market at $7.73-1/2.

CBOT corn prices have jumped 20 percent this month alone, and are up over 80 percent from a year ago as the demand for corn from livestock feeders and ethanol plants surges.

The U.S. Department of Agriculture this week slashed 5 bushels per acre from its estimate of the average U.S. corn yield because of excessive rainfall and flooding in key corn states like top producers Illinois and Iowa.

“Concerns of a sharp drop in yields have triggered a massive stampede of buying,” said Koji Suzuki, a senior analyst at SBI Futures Co Ltd.

Nicholas Brooks, head of research and investment strategy at ETF Securities, said it now looked as though even those figures might be overly optimistic.

“I think a lot of analysts expect it to be worse than the USDA forecasts,” he said.

SOY MARKET EYES ARGENTINA

CBOT soybeans have drawn support from the weather woes, although those advances were limited by ideas that washed-out corn acres would be replanted with soybeans.

But the soy market had independent strength Thursday from concerns about Argentine labor strife that could steer more soy export business to the United States.

Argentine farmers lifted a strike this week over a government-imposed soy export tax, but U.S. traders said the soy market was rallying on fears the conflict would flare up again.

The conflict has boosted U.S. soy export sales as buyers seek alternatives to Argentina, the world’s third-largest soy supplier.

CBOT July soybeans were up 22 cents at $15.38-1/2 per bushel.

U.S. wheat prices fell on profit-taking from a strong rally on Wednesday, and on seasonal pressure from the U.S. harvest. Expectations of a large global wheat crop added pressure.

However, the wheat market pared early declines as corn and soybeans advanced. July wheat was down 4 cents at $8.65 a bushel.

European wheat prices were higher, with November milling wheat in Paris settling up 3 euros at 208 euros per tonne, but slipped back from an early peak of 211.25 euros.

CBOT rough rice futures turned lower, retreating from early strength, with July RRN8 down 8 cents at $19.85 per hundredweight after earlier touching $20.33.

Additional reporting by Nigel Hunt in London, Miho Yoshikawa in Tokyo and Niu Shuping in Beijing; Editing by Marguerita Choy

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