Corn and soyabean futures hit their highest levels in a month on Tuesday as hot and dry weather in the US Midwest crop belt threatened prospects for a bumper harvest that the global grain trade is counting on to replenish inventories. Wheat followed corn higher, with worries about disappointing Russian grain crops lending support.
At the Chicago Board of Trade, new-crop corn futures for December delivery posted the biggest gains, rising 5.5 percent, or 29-1/2 cents, to settle at $5.63-1/2 per bushel after hitting a three-month high at $5.64. December corn has risen 11 percent this week, the biggest two-day rise in the life of the contract.
Commodity funds helped drive the market higher, buying an estimated 40,000 corn contracts over the last two sessions, CBOT traders said. The buying spree suggests funds have turned bullish on corn after the latest weekly report from the US Commodity Futures Trading Commission showed funds holding a small net short position in corn as of June 12.
Tuesday's advance came a day after the US Department of Agriculture reported a larger-than-expected decline in weekly US corn and soyabean condition ratings, and as weather forecasts raised fears of further downgrades.
"It will be dry in roughly half of the corn and soyabean belt; no doubt there will be further deterioration for at least the next two weeks," said Don Keeney, meteorologist for MDA EarthSat Weather. In its weekly crop report on Monday, USDA said 60 percent of the US corn crop was rated in good to excellent condition, down 3 percentage points from the previous week, while analysts had predicted a 2-point drop.
Corn stockpiles in the United States, the world's biggest supplier, are projected to hit a 16-year low this summer. But the USDA has projected a record-large US harvest this autumn of more than 14 billion bushels, and a doubling of stocks by the summer of 2013. The current dry spell threatens that harvest. The USDA has projected an average US corn yield for 2012 at 166 bushels per acre, but with the drop in ratings, private forecasts are falling closer to 160 bushels per acre.
Front-month July corn ended up 13 cents at $6.12-1/2 after hitting $6.17, the highest spot corn price since May 22. CBOT July soyabeans ended up 49-1/2 cents, or 3.6 percent, at $14.33-3/4 a bushel, while November soyabeans rose 45-1/4 cents, or 3.4 percent, to $13.84-1/2 after "gapping" higher at the open. CBOT July wheat settled up 19-1/4 cents, or 3.1 percent, at $6.49-1/2 per bushel.