Grain futures rocket on poor weather
Grain and soybean prices soared as hot, dry weather in the Midwest stoked fears that U.S. crop production will fall short of expectations.
Soybean futures led advances, surging 4.6% to a one-month high, as traders fretted that adverse weather over the next week will damage the soybean crop during its critical growth stages. Corn prices followed soybeans higher as traders worried the corn crop, while further along its development, also may suffer somewhat.
September soybean futures finished with the biggest one-day percentage gain for a front-month contract since October 2011 at the Chicago Board of Trade. Futures briefly rose by the exchange-imposed daily limit of 70 cents for one-day price moves before settling at $14.2775 a bushel, up 62 1/2 cents.
Corn prices also hit a one-month high. September corn, the front-month contract, gained 20 1/4 cents, or 4.1%, to $5.1575 a bushel. December corn, the contract most closely associated with this fall's harvest, jumped 30 1/2 cents, or 6.5%, to $5.005 a bushel.
Wheat prices also rose, with CBOT September wheat futures climbing 20 1/4 cents, or 3.2%, to settle at $6.5475 a bushel.
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Monday's rally came after grain and soybean futures had tumbled for much of this year amid forecasts for big U.S. crops this year and softer demand for corn from foreign buyers. Market participants largely have been anticipating huge crops this fall that would help replenish domestic supplies that shrunk to historically low levels after last year's severe U.S. drought curtailed production.
But the U.S. soybean crop is seen as especially vulnerable to soaring temperatures and dryness in coming weeks as it goes through important growth phases. Also, the crop was planted later than usual due to a wet, chilly spring in the Midwest, making it more vulnerable to adverse late-summer weather.
"People are getting worked up over the weather, and with good reason," said Jack Scoville, vice president of Price Futures Group in Chicago.
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Traders are less concerned about corn because the crop already went through its delicate pollination stage in many areas last month. "We're going to have corn," Mr. Scoville said. "But the beans could get very, very snug."
In the next week, big farm states including Iowa, Illinois and Indiana will experience above-normal temperatures, including 100 degrees in some places, forecasts show.
"We have such a dry pattern across much of the Midwest over the next few weeks," said Joel Widenor, an agricultural meteorologist with private forecaster Commodity Weather Group LLC. "Our view is that the worst of the dryness encompasses about 40% of the Corn Belt."
Some analysts cautioned that the potential damage to the soybean crop could be less than feared, noting that soybeans are known for showing resilience to stressful weather late in their growing season. Last year's crop, for example, turned out better than some had expected despite the worst U.S. drought in decades, thanks to some timely rains late in the summer.
"Crop conditions for soybeans could rebound around harvest time" in autumn, said Sid Love, an analyst with Kropf and Love Consulting in Overland Park, Kan.
Soybeans have rallied over the past week, due in part to concerns raised about the crop on an annual crop tour in the Midwest last week that's closely watched by traders and analysts.
The tour's organizer, farmer-advisory firm Pro Farmer, projected a U.S. soybean crop this fall of 3.158 billion bushels, with a yield of 41.8 bushels per acre. That was below the U.S. Department of Agriculture's most recent estimates earlier this month of 3.255 billion bushels of production and 42.6 bushels per acre in yield.
Pro Farmer, based in Cedar Falls, Iowa, projected a U.S. corn crop of 13.46 billion bushels, with a yield of 154.1 bushels per acre. That would be down from the USDA's August estimates of 13.8 billion bushels and 154.4 bushels per acre.
--Ian Berry contributed to this story.
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(END) Dow Jones Newswires
August 26, 2013 15:49 ET (19:49 GMT)
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