July 20, 2012 / 1:51 PM / 7 years ago

GRAINS-US corn, soy hit record highs as heat bakes crops

* Soy hits record $17.77-3/4, corn $8.28-3/4
    * Relentless U.S. drought bakes each crop
    * No relief from drought seen
    * UN's FAO concerned but sees no food crisis for now

 (Updates prices, adds new quote)
    By Sam Nelson and Michael Hirtzer
    CHICAGO, July 20 (Reuters) - U.S. corn and soybeans rose to
record highs on Friday, extending the biggest gains in 2-1/2
years, as scorching temperatures and a relentless drought baked
crops in America's heartland, including top producing states
Iowa and Illinois.
    Expected crop shortfalls and surging prices, with corn and
soybean posting their fifth straight week of gains, prompted the
United Nations agriculture agency to talk of a "serious
situation" though not yet a food crisis.
    The new-crop contracts for each crop jumped 2 percent to
contract highs at the Chicago Board of Trade, with the extreme
drought conditions forecast to continue through early August, a
time when soybeans are most vulnerable.
    "Everything today is focused on the weather for soybeans,"
said Karl Setzer, analyst at MaxYield Cooperative in West Bend,
Iowa. "Historically, August is when the soy yield is determined,
but because everything is early this year, we are seeing the
buying interest show up earlier."
    CBOT soybeans for August delivery ended 23-3/4 cents
higher at $17.57-1/2 per bushel after earlier hitting a record
peak of $17.77-3/4. New-crop November beans gained 34
cents to $16.86-1/4 after hitting a contract high earlier in the
    Some 16 percent of the soy crop was setting pods at the
beginning of the week, nearly double the average pace for this
time of year, the U.S. Agriculture Department said.
    Rains this week provided little relief from the most
extensive U.S. drought in 56 years, said Don Keeney,
meteorologist for MDA EarthSat Weather. 
    CBOT September corn jumped to a record $8.28-3/4 per
bushel before settling at $8.24-1/2, a gain of 16-3/4 cents. 
    New-crop December gained 17-1/4 cents to $7.95-3/4 and has
risen more than 50 percent in a month.
    "We know we've lost corn yield but we don't know how much,"
Setzer said.
    CBOT wheat gained 8-1/4 cents to $9.43-1/4, with the
winter wheat crop already harvested and escaping the wrath of
the worst drought in more than half a century. Wheat gained 12
percent for the week for the fifth straight week of gains.
    "It will be dry and very hot in the area with temperatures
in the 100s (degrees Fahrenheit) in St. Louis Sunday through
Thursday, reaching 106 F on Wednesday," said Keeney. 
    The high heat was expected for much of the central and
western Midwest.      
    The rapid price surge was worrying, and prices could rise
even further in the coming weeks, driven by U.S. corn, Abdolreza
Abbassian, senior economist and grain expert at the United
Nations' Food and Agriculture Organization (FAO), told Reuters.
    "It is a serious situation which has to be monitored closely
but it is too early to refer to it as a food crisis situation,"
he said. "We do not see any production or supply problems with
rice. That is very important for food security of millions of
people around the world." 
    Andrew Woodhouse, a Sydney-based analyst at Advance Trading
Australasia, said: "It's burning each day." 
    The U.S. Midwest is enduring its worst drought since 1956,
which shows little sign of abating.
    A weather report from the Drought Monitor showed the drought
was expanding. Half of the Midwest was in severe to exceptional
drought, up from about a third of the region a week earlier. 
    Hotter-than-normal temperatures were expected through
October in most of the contiguous 48 states, the National
Oceanic and Atmospheric Administration said, and did not rule
out drought continuing past October. 
    It said there was a chance of the El Nino anomaly which
could mean more excessive heat and dryness by the end of 2012.
El Nino is characterized by unusually warm ocean temperatures in
the equatorial Pacific. 
    With temperatures soaring, prices have followed suit, and
high prices for corn and soybeans in the world's largest
grain-exporting nation are beginning to dent export sales.
Concerns were growing that high prices could trigger a crisis
like that of 2008, when food shortages triggered riots in some
 Prices at 2:27 p.m. CDT (1926 GMT)      
                              LAST      NET    PCT     YTD
                                        CHG    CHG     CHG
 CBOT corn                  824.50    16.75   2.1%   27.5%
 CBOT soy                  1757.50    23.75   1.4%   46.6%
 CBOT meal                  543.00    11.00   2.1%   75.5%
 CBOT soyoil                 54.36    -0.04  -0.1%    4.4%
 CBOT wheat                 943.25     8.25   0.9%   44.5%
 CBOT rice                 1553.50     4.00   0.3%    6.4%
 EU wheat                   269.75     2.25   0.8%   33.2%
 US crude                    91.56    -1.22  -1.3%   -7.4%
 Dow Jones                  12,831     -112  -0.9%    5.0%
 Gold                      1584.40     3.11   0.2%    1.3%
 Euro/dollar                1.2161  -0.0118  -1.0%   -6.1%
 Dollar Index              83.4700   0.5910   0.7%    4.1%
 Baltic Freight               1037      -16  -1.5%  -40.3%
 (Reporting by Sam Nelson and Michael Hirtzer, additional
reporting by by Sybille de La Hamaide, Marion Douet, Colin
Packham and Svetlana Kovalyova; Editing by Anthony Barker,
Leslie Gevirtz and Tim Dobbyn)
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