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Crop troubles send grains surging

08/26/2011 @ 3:22pm

CHICAGO (Dow Jones)--U.S. corn and soybean futures ended sharply higher Friday, climbing on a combination of crop concerns, outside market support and technical buying.

Corn futures for September delivery at the Chicago Board of Trade jumped 20 1/4 cents, or 2.8% to $7.55. December corn climbed 22 1/2 cents to $7.68, gaining 5.9% for the week.

Both corn and soybeans are being fueled by a hot, dry summer that has stressed the crop. Troubling reports from a major crop tour throughout the week reaffirmed traders' worries.

"The crop is bad, and it appears to be getting worse," said Joel Karlin, analyst for Western Milling, a California feed company.

Traders noted that the forecast for the rest of August remains relatively dry in much of the Midwest, which could cause further damage to soybean yield potential.

Much of the damage to the corn crop, which has an earlier growing season, is already done.

Professional Farmers of America on Friday forecast the U.S. corn crop at 12.484 billion bushels, well below federal expectations, raising concerns that the coming harvest won't replenish already-tight inventories.

The group, known as Pro Farmer, released its estimates after the close Friday, at the end of its annual tour through the U.S. corn belt. Tour findings are only one part of how Pro Farmer arrives at its forecast.

The results weren't a surprise to many traders who have seen plenty of troubling reports about the crop from various locales in recent weeks, but they are nonetheless supportive, they said.

"It's confirmation of everybody's suspicions," said Rich Feltes, senior vice president of research for R.J. O'Brien.

Surprising export sales Friday of more than 360,000 metric tons of corn to unknown destinations added to the bullish tone, traders said. Traders said the sales were likely to Japan, although analysts mentioned Egypt and China as other possibilities.

The purchases, coming amid high prices as harvest supplies start to enter the pipeline, show that some buyers are worried about their ability to procure corn, given the tight supply outlook, Karlin said.

Soybeans were the first crop to rally Friday, breaking through long-term resistance at $14 per bushel, and were later joined by surging corn prices. The grain and oilseed complex was also boosted by higher equities, analysts said.

September CBOT soybeans climbed 2.1% to $14.16 3/4 a bushel. September soyoil ended up 1.8% to 56.60 cents per pound, while September soymeal gained 2.2% to $376 per short ton.

CBOT wheat for September delivery ended up 5 cents, or 0.7%, to $7.62 1/4. MGEX wheat, supported by worries about the spring wheat harvest, climbed 2.3%, or 21 1/2 cents, to $9.56 1/4.

Kansas City Board of Trade wheat ended up 2.2%, or 18 1/4 cents, to $8.66.

CBOT rice futures for September delivery closed up 24 cents, or 1.4%, to $16.99 per hundredweight.

-By Ian Berry, Dow Jones Newswires; 312-750-4072; ian.berry@dowjones.com
(END) Dow Jones Newswires
August 26, 2011 16:06 ET (20:06 GMT)

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