July 11, 2012

 

US corn, soy bounce back preceding USDA report

Following a severe US grain belt drought since mid-June, Chicago corn and soy bounced back on Wednesday (July 4) on positioning ahead of a key US government report which is expected to show lower yields.

 

Wheat futures were unchanged in early Asian trade after closing lower on Tuesday (July 10).

   

The recent heat wave in the US Corn Belt should prompt the USDA to lower its forecast of US corn yield in a monthly report later on Wednesday (July 4), a factor that could slash projected stockpiles of the grain by a third, analysts said.

 

The government in June left its forecast of the corn yield at a record-large 166 bushels per acre, high enough to more than double projected US corn ending stocks for 2012-13 after a disappointing harvest last autumn.

 

Since that report, scalding temperatures and predominantly dry weather have scorched the Midwest grain belt, just as much of the corn crop was starting pollination, the key growth phase for determining yield.

 

Corn and soy fields in much of the US Midwest will remain dry until the end of the week, with temperatures hovering in the 80s and 90s degrees Fahrenheit, forecasters predicted Tuesday (July 10).

 

However, the return of typical summer weather is unlikely to reverse the damage to corn and soy crops caused by the crippling drought and heat wave that hit the Midwest during the past month.

 

Weekly crop ratings from the USDA on Monday (July 9) confirmed a sharp deterioration in the state of corn and soy crops, keeping ratings at their lowest level since 1988.

 

In a sign of the intensity of the weather rally in the past month, large speculators, including hedge funds, have more than doubled their bullish bets on US corn, regulatory data showed on Monday (July 9).

 

Commodity funds sold an estimated net 11,000 Chicago Board of Trade corn futures contracts on Tuesday (July 10), trade sources said. They sold 6,000 soy and 3,000 wheat contracts.

   

The euro wallowed around two-year lows against the dollar as investors waited to see if a German court would approve the use of euro zone's bailout fund to help contain the region's debt crisis.