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Lanworth corn estimate sends grain prices soaring

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Grain futures jumped in Chicago - defying a sell-off in external markets which scuppered coffee's winning run -after Lanworth analysts lowered the bar further on US corn yield estimates.

Chicago's benchmark December

corn

contract overcame a slow start to soar more than 3% to $7.64 ¼ a bushel in midday deals, Illinois time, recovering nearly all the losses of the last session. The lot had eased to $7.58 ¼ a bushel with an hour of trading to go, up 2.7%.

The rise dragged fellow grain

wheat

up more than 2% to $7.78 a bushel, in Chicago, for December delivery, before easing back to $7.73 a bushel, up 1.5%.

The increases, which came even as Wall Street shares fell 1.5% and oil 2.2%, were attributed to an estimate from Lanworth, the satellite-based analysis group, that the US corn yield would come in at 143.3 bushels per acre.

The US Department of Agriculture has pegged the crop at 153.0 bushels per acre.

A difference of 10 bushels per acre would be equivalent to more than 800m bushels in production.

While Lanworth declined to comment to Agrimoney.com on its estimates, saying they were "confidential to clients", the estimate was confirmed by market sources.

'Lower and lower'

"The yield estimates just keep getting lower and lower," Jerry Gidel, at Chicago-based North America Risk Management Services, said.

The Lanworth figure follows an estimate overnight from broker Intl FCStone pegging the US corn yield at 146.3 bushels per acre, which was itself viewed as an estimate supportive for prices.

"Private analysts continue to make swift and significant cuts to 2011 US corn yields," Sudakshina Unnikrishnan, at Barclays Capital said.

Mr Gidel added: "But this Lanworth talk is different territory."

At PitGuru, Matthew Pierce termed the figure "wildly bullish".

The estimate comes amid a market already echoing to rumours of actual yields – both encouraging and not – as the US harvest moves north, with analysts expected to be able to put together a more reliable picture next week.

"We are now close enough to harvest that combines will be the real tale of the tape," US Commodities said.

Rain where it's needed?

The rise helped

soybeans

gain too, despite the potential for the latest tropical depression in the Gulf of Mexico to bring late relief to dry US crops.

"If this turns north into Louisiana and up the Mississippi river, we will see a truckload of moisture hit needy areas in Illinois, Iowa, Missouri and into Minnesota," Mr Pierce at PitGuru said.

"This would help the soybean crop dramatically."

Indeed, Mr Gidel noted the potential for high corn prices, sitting at historically high levels relative to soybeans of more than 50%, to encourage South American growers to switch crops as plantings approach.

"They might be thinking 'why plant soybeans here'," he told Agrimoney.com.

Chicago's November soybean lot stood up 0.8% ao $14.45 ¼ a bushel.

Data disappoints

The crops' performance defied downbeat expectations for the session, after disappointing US jobs data added to an air of caution in financial markets instilled by a long weekend in America, which celebrates Labor Day on Monday.

The world's biggest economy failed to add any jobs last month, and gained fewer than had been thought in June and July too, official data showed.

Shares tumbled in Western markets, with London stocks closing down 2.3% and Frankfurt and Paris shares down more than 3%.

And most commodities dipped too for fears of weakening economic growth slowing demand. The CRB commodities index fell 0.3%.

'Never ever never gives up'

Some soft commodities were among casualties, including sugar, which dipped 1.2% to 29.24 cents a pound, for October, in late deals in New York, despite an upgrade by Standard Chartered to price forecasts in early 2012.

December

coffee

crossed, just, back into positive territory in late deals in New York, adding 0.1 cents to 289.85 cents a pound, but looked like falling – narrowly – short of recording a 19th successive intraday high above the previous one's.

Even so, a close ahead would represent a respectable ninth successive positive finish.

"Coffee just never ever never gives up," Jurgens Bauer at PitGuru said.

"This market could drop 12 cents and still be bullish," he added referring to the bean's recent ability to recover from intraday selling.

By Agrimoney.com

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