Grain and oilseed futures soared again on Thursday to pass a
clutch of price landmarks, spurred by the "blistering temperatures and sparse
rainfall" which prompted further cuts to hopes for US yields.
Setbacks to grains in Ukraine and France only fuelled the buying spree.
Corn for December, Chicago's best-traded contract, soared nearly 6% at one point as it topped $7.00 a bushel for the first time, while November soybeans gained 3.1%
to bust through $15.00 a bushel and set their own contract high.
Crop prices at close on Thursday
Kansas wheat (September contract): $8.43 a bushel, +5.1%
Chicago corn (December):$7.08 ½ a bushel, +4.7%
Chicago wheat, (September): $8.38 a bushel, +4.6%
Chicago soybeans, (November): $15.26 ½ a bushel, +3.5%
Paris wheat, (November): E243.75 a tonne, +2.6%
Paris rapeseed, (November): E502.00 a tonne, +2.1%
London wheat, (November): £181.75 a tonne, (+1.8%)
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Wheat in Chicago, for September delivery, broke above $8.00 a
bushel for the first time in 10 months while benchmark November lots set
contract highs in London of £183.00 a tonne and in Paris of E246.00 a tonne.
The rises followed an Independence Day holiday break in the
US which offered no relief from the searing temperatures which have cut hopes
in particular for corn, which is undergoing is sensitive pollination period.
"A heat wave intensified on the July 4 holiday," Gail
Martell at Martell Crop Projections said, noting temperatures in Midwest corn
and soybean country reaching as high as the low 100 degrees Fahrenheit, some
10-12 degrees Fahrenheit above normal.
And the heat "will continue a few more days", before cooler
temperatures are expected to arrive, bringing Chicago back to about 80 degrees
Fahrenheit by Monday.
'Pretty much irreversible'
However, rainfall is expected to remain sparse. And even if
rain levels did beat those forecast, "you are not going to get more than
middling yields" in many areas, Jerrod Kitt at broker Linn Group said.
"In a lot of places the damage is pretty much irreversible,"
with one-quarter of the crop undergoing pollination at the start of the month,
and potentially one half by the end of the weekend.
The market was probably in corn trading a "sub-150 bushels
an acre yield", he said, a result which would be closer to last year's 147.2
bushels per acre rather than the 166 bushels per acre the US Department of
Agriculture is counting on.
'Under supply pipeline levels'
At Hightower Report Terry Roggensack, warning that the "window
for crop-saving rains and cooler temperatures is closing quickly", said that
trade projections were in the range of 145-150 bushels an acre.
A survey by Agweb showed farmers pegging yields even lower,
with 46% foreseeing a yield of 139 bushels per acre or less, compared with 1%
estimating the result at 160-169 bushels an acre.
However, even factoring in a yield of 149 bushels an acre warranted
higher prices, implying a drop to the low 600m bushels in year-end stocks for
2012-13, even if some reduction in use because of high values is factored in,
Mr Roggensack said.
"There would be considered under minimum supply pipeline
levels by some, and this type of extreme tightness in supply would call for
extensive demand destruction and price rationing," he said.
'Die from heat'
As an extra impetus to prices, the official weather centre
in Kiev cut its estimate for the Ukraine corn crop to 20m-21m tonnes from 22m
tonnes, and below a government forecast of at least 25m tonnes.
"Plants have begun to die from heat," said Tetyana Adamenko,
head the centre's farm department, who had warned that further dry temperatures
posed a risk to spring crops, after severely denting prospects for winter
grains.
Meanwhile, in Europe, rains have raised questions for the
quality of the French wheat crop, the European Union's biggest.
"Europe continues to build premiums for quality wheat with
big question marks over potential UK results and France still some way off
getting their crop in the bin," Jaime Nolan Miralles, commodity risk manager at
FCStone, said.
"Add to this the fact that the last two weeks price spike
has caught many international buyers on the hop and it would appear as though
we still have plenty of cash buying interest to sustain, if not even bolster,
current price levels."
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