July 20, 2011

 

US corn returns to US$7 before rain dampens sentiment

 

 

US grain prices soared to their best highest in a month as hot weather raised concerns for US corn already deteriorating quicker than analysts had expected, with the Texas crop the worst on record.

 

Corn failed to hold on to all its early gains of 4% after meteorologists put extra moisture back into forecasts for later this week.

 

December corn, the best-traded lot, had retaken US$7 a bushel in Chicago for the first time since June 14, with wheat for September hitting US$7.27 a bushel, the highest for a spot contract since June 16.

 

"There looks like increased rains in the two-to-four day timescale. That's what stabilised things," an analyst said.

 

However, the increasing probability of a fresh so-called heat dome over the Plains and the Midwest towards the end of the month kept prices firmly in positive territory.

 

The concerns have been heightened by the period of crop development, with corn "in the midst of pollination", another analyst said.

 

"We are going to have half of corn in Iowa and Nebraska pollinating within a week, and we have to hope the crops keep it together," he said. "These are the states we want yields of 180 bushels an acre out of to make up for the losses of in Ohio and Kansas, where crops are burning up."

 

Furthermore, the degree of crop damage that already concerned surprised investors, with a US crop report overnight dropping the level of US corn rated in "good" or "excellent" condition by three points in a week to 66%, the lowest rating for this period for three years.

 

"Corn in Texas, hit by the worst drought conditions in 100 years, appears to be in a dismal state," Steve Meyer and Len Steiner said in a report, noting that nearly two-thirds of the crop was in a "poor" or "very poor" state.

 

"This is by far the worst performing Texas crop in the 26 years that the crop condition reports have been issued."

 

Also underpinning prices was a revived appetite for risk assets which sent Wall Street shares up 1.0% in lunchtime deals and depressed the dollar, a gauge of investor nerves, which fell 0.5% against a basket of currencies.

 

A weaker dollar itself boosts the attractions of dollar-denominated assets by making them more affordable as exports.

 

Chicago corn for December stood 1.8% higher at US$6.85 a bushel with an hour of trading to go. The old crop September contract stood 0.7% higher at US$7.01 a bushel.

 

Wheat for September was 2.0% higher at US$7.03 a bushel.