Corn and soyabeans soared to record highs on Thursday as the worsening drought in the US farm belt stirred fears of a food crisis, with prices coming off peaks after investors cashed out of the biggest grains rally since 2008. Corn prices crossed into uncharted territory above $8 per bushel - about three-and-a-half times the average price 10 years ago of $2.28. Soyabeans punched past $17 for the first time - also three-and-a-half times the 2002 average.
Analysts said that while forecasts for continued dry weather are expected to sustain the rally, corn prices could be vulnerable to any move by the government to lower the amount of corn-based ethanol blenders are required to mix with gasoline. Even as chatter about a possible revision of the ethanol mandate has escalated, US Agriculture Secretary Tom Vilsack, the former governor of top farm state Iowa, has ruled out such a move.
"The only thing that can stop this rally is if they pull the mandate," said grains analyst Mark Kinoff, president of Ceres Hedge in Chicago. "In two weeks, if corn prices are $2 higher they might change their tune," he added. "Obama would need inexpensive food and energy to get back into the Oval office," he said of President Barack Obama and his campaign to win reelection in November.
The National Oceanic and Atmospheric Administration forecast above-normal temperatures and below-average precipitation for the Midwest through October. That bodes ill for soyabeans, which will go through the critical yield-setting stage in the next two weeks into August and need adequate moisture for proper growth.
About 80 percent of the corn crop is already pollinating. Hopes are fading fast for any recovery in yield in areas hardest hit by the worst drought 56 years, analysts said. Soyabeans took over leadership of the price rally, posting much larger gains than corn on Thursday.
CBOT spot September corn ended 1.6 percent higher at $8.07-3/4 per bushel after hitting a record high $8.12, surpassing the peak of $7.99-3/4 set last July. New-crop December was off 0.7 percent at $7.78-1/2, after hitting a contract high of $7.99. August soyabeans jumped 3 percent to $17.33-3/4, after posting a record-high $17.49. New-crop November rose 2 percent to $16.52-1/4, hitting a contract high $16.73-3/4. Chicago September wheat put on 3.5 percent at $9.35, peaking at a session high $9.38, the highest in nearly four years. Wheat futures continue to remain in the shadow of the all-time high set in 2008 at above $13 per bushel.
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