September 20, 2010

US corn prices jump to two-year high amid freezing weather

Corn surged to the highest price in almost two years and soybeans extended a rally to an eight-month high as freezing weather threatens crops in China and Canada and a prolonged drought slows planting in Russia.

Temperatures dropped below freezing overnight, damaging wheat, canola and barley in western Canada, according to weather forecasts. Freezing weather in parts of northeast China may hurt maturing corn, the China National Grain & Oils Information Center said. Russian farmers have sown 39% less land with winter grains than a year earlier because of dry weather, according to reports.

Corn futures for December delivery rose 17.25 cents, or 3.5%, to settle at US$5.1325 a bushel at 1:35 p.m. on the CBOT, the biggest gain in two weeks. Earlier, the price reached US$5.1725, the highest level for a most-active contract since September 30, 2008.

Corn's 7.3% rally this week was the biggest since June, and the commodity's seven straight gains marked the longest rally since June 2008.

Soy futures for November delivery gained 32.75 cents, or 3.2%, to US$10.69 a bushel on the CBOT, after touching US$10.72, the highest level for a most-active contract since January 4. For the week, the price rose 3.7%, the most in two months.

Corn rose to a record US$7.9925 on June 27, 2008, and soybeans climbed to an all-time high of US$16.3675 on July 3, 2008.

Rising grain prices will increase the costs for producers of livestock and crop-based fuel. Tyson Foods Inc., the largest US meat processor, fell 6.5% at 2:21 p.m. in New York trading, heading for the biggest slide in 14 months. Archer Daniels Midland Co., the second-biggest US ethanol producer, dropped 1.9%, heading for the first weekly decline in a month.

Meanwhile, hedge-fund managers and other large speculators increased their net-long positions to a record in Chicago corn futures in the week ended September 7, according to US Commodity Futures Trading Commission data.

Net-long positions, or the difference between bets on price gains and declines, rose 6.2% to 401,884 contracts, the most since June 2006, when the CFTC began collecting the data.

Corn is the biggest US crop, valued at US$48.6 billion in 2009, followed by soy at US$31.8 billion, government figures show.