July 11, 2006

 

US corn prices rise to 2-year high on prolonged drought concerns

 

 

Corn prices rose to a two-year high in Chicago on speculation that rains would give the driest areas of main growing regions a miss, exacerbating already worsened crop yields.

 

As much as 20 percent of the Midwest may miss the rain falling in the next 3 days, US Weather Service forecaster Francis Dee said. Rains would miss parts of Iowa, Minnesota, Nebraska and South Dakota, four of the top six producing states,

 

Furthermore, temperatures may reach 100 deg F (37.8 deg C) by Thursday (Jul 13).

 

Corn for December delivery rose 8.75 cents, or 3.3 percent, to US$2.745 a bushel at the Chicago Board of Trade. Prices earlier reached US$2.77, the highest since June 2004.

 

The previous week, corn was up 9.9 percent from a year ago on drought concerns and increased speculation.

 

Corn rose 2.1 percent last week, the fourth consecutive week of gains and is likely to continue into this week, according to experts.

 

Temperatures are expected to rise as much as 10 deg F above normal starting from Jul 15 with the most intense heat from southwest Kansas to North Dakota, according to Earth Satellite Corp.

 

Rains in the Midwest through Jul 12 would not be enough to relieve soil-moisture deficits, he said.

 

The area is not getting the normal frequency of rain, resulting in persistent or expanding moisture deficits.

 

Parts of the western Midwest have received less than half the normal rainfall in the past two months.

 

The heat wave could not have come at a worse time as corn plants are entering the crucial pollination period. Pollination can be disrupted if temperatures persist at 96 deg C for consecutive days. Water requirements for corn plants also triples during pollination.

 

Extreme drought from Arizona and Texas to central North Dakota would expand west across Montana and east into Iowa and Minnesota, the Climate Prediction Center said last week.

 

Drought is expected to persist in corn- and soybean-growing areas of Nebraska, South Dakota and southwestern Iowa.

 

The USDA estimates that at least 10 percent of the crop had pollinated as of Jul 3, equal to a year earlier and the five-year average.

 

About 68 percent of the corn crop was rated in good or excellent condition as of July 2, compared with 71 percent a week earlier and 62 percent a year ago.