September 6, 2010

US corn futures soar to 23-month high

US corn futures rallied to a fresh 23-month high on Friday (Sep 3) after a closely watched private analytical firm projected the final US corn yield would be 3.9% below the government's most recent estimate.

Front-month CBOT corn for September delivery climbed 16.75 cents, or 3.9%, to US$4.4975 per bushel, while the December contract, the most active, climbed 17 cents to US$4.645.

Friday's catalyst was a mid-morning report from Informa Economics, a Memphis agricultural consultant and research firm, that projected a final 2010 US corn yield of 158.5 bushels per acre, traders said. That would be down from the USDA's most recent estimate of 165 bushels per acre.

The forecast reaffirmed an emerging view in the industry that the crop will be weaker than first expected. Farmers and analysts said the crop is highly variable after a soggy summer that flooded out low-lying areas of many fields and washed away nitrogen, a crucial nutrient for corn. Hot night-time temperatures have also deprived the crop a chance to "rest", analysts say.

Analysts believe that a yield around 160 bushels per acre would lead to uncomfortably tight supplies for the US market, which has been presumed to be a growing exporter because of drought-ravaged Russian crops. The drought in Russia and crop troubles in other parts of the world has sent grains and oilseeds sharply higher the past two months.

The market's rally to its highest price since October 2008 triggered some pre-established buy orders, and attracted a wave of speculative fund money, traders added. Funds bought an estimated 25,000 contracts, a sign of significant outside money flow, traders said.

Meanwhile, wheat and soyalso continue to surge. CBOT wheat for December delivery gained 27.5 cents, or 3.9%, to US$7.4125 per bushel and November soy gained 26 cents, or 2.6%, to US$10.35.