April 4, 2008

US grain prices surge on supply concerns

US agriculture futures rose decidedly Thursday, with corn prices surpassing US$6 a bushel for the first time as scant supply looms due to buying of grain for feed livestock and biofuel.

Corn soared to record rally due to intense global demand for the crop at a time when the USDA said the US production for the crop is to drop by 8 percent this year.

The bigger-than-expected drop will likely add to already tight supplies, leading to higher meat prices and soaring costs for producers of alternative fuel like ethanol, analysts said.

Elaine Kub, a grains analyst with DTN in Omaha, Nebraska, said that looking at the fundamentals, everything points to a bullish outlook for corn.

US corn for May delivery was up by 4.25 cents at US$6 a bushel on the Chicago Board of Trade, after earlier rising to US$6.025 a bushel, the highest ever.

This year, corn has climbed by nearly 30 percent, with the possibility of going higher due to cold and wet weather in the US corn belt.

Meanwhile, May soy added 14 cents to settle at US$12.57 a bushel on the CBOT, while May wheat inched 0.5 cent higher to settle at US$9.37 a bushel.