By Jeff Wilson and Tony C. Dreibus
June 11 (Bloomberg) — Corn topped $7 a bushel for the first time as unusually wet weather damaged the crop in the U.S., the world’s biggest producer. Soybeans rallied to a three- month high and wheat surged the most since February.
Corn productionwill fall 10 percent to 11.735 billion bushels this year, a bigger drop than forecast a month ago, the U.S. Department of Agriculture said yesterday. Inventories in September 2009, before next year’s harvest, will plunge to a 13- year low, the USDA said.
The price of corn, used mostly to make livestock feed and ethanol, jumped 76 percent in the past year and touched records for five straight sessions. Soybeans, wheat and rice all reached records this year, fueling a pickup in world food inflation. Adverse weather has curbed production of some crops as economic growth boosted demand for grains, meat and dairy products.
``A lot of corn has been damaged beyond repair,” said William Bayer, a partner at PTI Securities in Chicago. “Wheat will become an alternate feed source, especially if it’s relatively cheaper and more readily available than corn. People are starting to realize that $7 corn may be cheap. Livestock producers won’t be able to pay for $9 corn.”
Corn futures for July delivery rose 30 cents, or 4.5 percent, to a record $7.0325 a bushel at 11:21 a.m. on the Chicago Board of Trade. The 30-cent gain was the maximum permitted by the exchange.
More than 4 million acres of corn were left to be planted as of June 1, before Midwest fields received up to 12 inches (30 centimeters) of rain in the past week, according to government data.
Some fields in Iowa, the biggest corn-growing state, may receive as much as 6 inches of rain in the next 24 hours with the remainder of the Midwest getting up to 2 inches of rain during the next five days, said Mike Tannura, a meteorologist for T-Storm Weather in Chicago.
Corn planted in wet, cool soils develops shallow roots, increasing the threat of damage from hot, dry weather in July and August. The saturation also reduces the soil’s nitrogen content, which is needed for plant development.
In the U.S., the world’s largest exporter of corn, 60 percent of the crop was in good or excellent condition as of June 8, down from 63 percent the previous week, the USDA said June 9 in a report. A year earlier, 77 percent got the highest rating. Iowa, Illinois, Nebraska, Minnesota and Indiana, the five top-producing states, reported declines.
In a survey released March 30, U.S. farmers said they would sow 86 million acres with corn this year, down 8.1 percent from a year earlier, the department said. The USDA on June 30 may cut its corn-acreage estimate when it releases updated figures based on a survey of farmers taken last week, analysts said.
“Corn acreage may fall 2 million to 3 million acres,” said Brian Hoops, president of Midwest Market Solutions in Yankton, South Dakota. “Prices could rise to $8.50” to slow demand for livestock feed and ethanol production, Hoops said.
The government yesterday cut its yield forecast for corn by 3.2 percent to 148.9 bushels an acre, from 153.9 predicted last month and 151.1 for last year’s crop. The reduction reflects “persistent heavy rainfall across the Corn Belt,” the USDA said in the report.
“The cut in yields this early in the growing season was a shock,” said Roy Huckabay, executive vice president for the Linn Group in Chicago. “We have to start rationing supplies.”
The wet weather also has delayed some soybean planting in the U.S., the world’s largest producer and exporter of the oilseed. Soybean stockpiles on Aug. 31, before this year’s harvest, will fall to 125 million bushels, the government said yesterday.
“We are losing soybean yield and acres,” said Brian Hoops, president of Midwest Market Solutions in Yankton, South Dakota. “Supplies are already tight, so eventually soybeans are going to run to new highs.”
Soybean futures for July delivery rose 67.25 cents, or 4.7 percent, to $15.1375 a bushel in Chicago, after earlier rising the exchange limit of 70 cents to $15.165, the highest for a most-active contract since March 6. Soybeans are up 83 percent in the past year, reaching a record $15.865 on March 3 on increased global demand for the oilseed.
About 77 percent of the soybean crop has been planted on June 8, compared with 69 percent a week earlier and 92 percent in 2007, the USDA said. Wet weather has kept growers out of fields. About 57 percent of the soybeans were in good or excellent condition, compared with 70 percent a year earlier, the USDA said, rating the crop for the first time this year.
Wheat rose the most in more than three months on heightened speculation that livestock producers will use more of the grain as animal feed because of soaring corn prices. Wheat has dropped 37 percent from a record in February after growers worldwide seeded more to take advantage of the rally. Wheat’s premium to corn has declined to $1.4975 a bushel from $7.15 on March 12.
Wheat futures for July delivery rose 51 cents, or 6.3 percent, to $8.60 a bushel in Chicago. A close at that level would be the biggest gain since Feb. 26. The price earlier rose the exchange limit of 60 cents to $8.69 and has advanced 54 percent in the past year after adverse weather in 2007 curbed global yields. The record on Feb. 27 was $13.495.
Rice futures for July delivery rose 39 cents, or 2 percent, to $19.81 per 100 pounds in Chicago. Rice has gained 83 percent in the past year and reached a record $25.07 on April 24.