Wednesday, July 18, 2012

corn seen rallying to record $8.50 as drought kills crops

Businessweek | Corn may rally to a record $8.50 a bushel as the worst U.S. drought in decades cuts production in the world’s biggest exporter, driving global stockpiles lower, according to broker Newedge USA LLC.

The U.S. harvest may drop to 11.8 billion bushels (299.7 million metric tons), said Dan Cekander, director of grain research, who correctly predicted in March that soybeans would trade at the most expensive level relative to corn since 2010. Cekander’s output forecast is 29.75 million tons less than the latest estimate from the U.S. Department of Agriculture, and would be the smallest crop since 2006-2007. Futures traded as high as $7.89 yesterday, near the $7.9925 record set in 2008.

The drought is baking farms from Arkansas to Ohio, reducing yields, after frosts followed by drought cut wheat harvests in the former Soviet Union, prompting the United Nations and the USDA to pare estimates for world grain harvests. Dimming corn- crop prospects in the U.S. may push global food costs higher, the Food & Agriculture Organization said earlier this month.

“If it doesn’t start raining the rest of July, you’re going to have a significant shortfall here in production,” said Cekander, a fourth-generation farmer who grows corn and soybeans in Illinois, the second-largest U.S. grower of both crops. “That would put the 2012-2013 world corn carry-out below last year,” he said, referring to year-end stockpiles.
Soybeans Climb

Corn for December delivery gained 0.2 percent to $7.73 on the Chicago Board of Trade at 12:51 p.m. in Singapore, erasing a drop of 1 percent. Since reaching the year’s low in June, the grain has rallied 53 percent. November-delivery soybeans, trading at $15.905 a bushel, reached $16.07 yesterday, the highest price since 2008.

Corn yields will probably drop to 134.9 bushels an acre as crop conditions deteriorate, Cekander said in an interview yesterday, forecasting prices of $8.25 to $8.50 for December futures. That compares with the USDA estimate of 146 bushels, and a forecast of 138 bushels from Last year’s harvest was 12.36 billion bushels, with a yield of 147.2 bushels.

“The fear is that the U.S. corn yield will decline to 125 to 130 bushels per acre if hot and dry weather persists through mid-August,” Cekander said. The 11.8 billion-bushel harvest estimate is based an area of 87.5 million acres (35.4 million hectares), lower than the USDA’s 88.9 million acres, he said.

About 55 percent of the contiguous U.S. states were in moderate-to-extreme drought at the end of June, the highest since December 1956, according to the National Climatic Data Center. USDA ratings for corn and soybeans as of July 15 were the worst for that time of year since a drought in 1988.


ProfGeo said...

I'm all for readable accounts as well as the minutiae, so I like The Omnivore's Dilemma (Pollan) for backstory on our corn dependence. (I got that in as a required text for my campus's entire freshman class a few years ago and several faculty colleagues are STILL grumbling, ha ha.) Even a cursory reading of it keeps one from being surprised at this year's corn crisis. Added annoyance for me is that I grew up in the Midwest and Iowa used to be a beautiful state before the corn totally took over.

CNu said...

Corn is the dominant species in North America and has been for many centuries now. Do not anger the corn, lest we all suffer its wrath!!!

Dale Asberry said...


ProfGeo said...

Corn's already irked, I'd imagine.

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