Corn Futures Tumble Despite Flood Damage
CHICAGO _ If rain last month almost endangered one of the most important corn crops in recent history, a suffocating heat might be its biggest enemy in the month ahead. Corn at an incredible $10 a bushel could be the consequence.
Many of the corn stalks across the country have shallow roots, since they didn’t need to penetrate deeply into the soil for water. Those weak roots could leave budding corn kernels starving in a parched midsummer, analysts said.
“It really boils down to Mother Nature,” said Jim Bower, president of Bower Trading, Inc, who added that the roots this year were the shallowest in his 35-year career.
Weather remains the wild card for corn, which is at record prices and contributing to high food costs. American-grown corn also feeds livestock, sweetens soda, helps fuel cars as ethanol and gets exported around the world.
Prices fell by 4 percent Monday to $7.38 a bushel, after reports from the Agriculture Department suggested that flooding in the Midwest was less damaging to the crop than initially believed and that higher prices might be reducing corn use.
The June floods led to anxieties that the upcoming harvest might not be able to satisfy the demand for corn, recently causing another leap in price.
The Agriculture Department survey found that farmers planted 87.3 million acres of corn, about 1.31 million acres more than a March survey indicated. The additional plantings could offset some of the crops drowned in the flood waters.
“The one thing I will say at this point: People may have exaggerated the flood losses,” said Dale Durchholz, a senior market analyst for AgriVisor in Bloomington, Ill.
In order to improve the accuracy of its plantings survey after the flooding, the Agriculture Department re-interviewed 1,200 farmers last week. Analysts said a fuller picture of how the flooding impacted the crop will emerge in August, when the cabinet agency releases another report.
The Agriculture Department also announced that the corn stocks held in reserve increased by 14 percent to 4 billion bushels compared to last year. In a sign that people are rationing corn, the corn stocks beat market expectations by more than 130 million bushels.
“This is bearish,” floor traders at the Chicago Board of Trade told each other as the numbers were publicly discussed at an event sponsored by the futures exchange on Monday morning.
The drop in price that followed the reports may be short-lived. Hot weather in August and July could decimate cornfields, lowering the yield below 149 bushels an acre.
“You can’t underestimate the impact of it,” said Dan Cekander, a grains analyst for the brokerage Newedge. “With the shallow root system, you could push that yield down to somewhere around 140 bushels an acre. You’ve got $10 corn.”
That could make it difficult to reach the harvest of 11.5 billion bushels estimated by the Renewable Fuels Association, a pro-ethanol trade group that argues that the country’s farmers can meet the foreseeable corn needs.
Other crops increased in price, reflecting the complex dynamics at work in food inflation. The market expected American farmers would harvest more acres of soybeans than the 72.1 million predicted by the Agriculture Department.
Prices jumped by 23 cents to $16.05 for July, a move that amounts to a plea that Brazil grow more soybeans in the winter, Bower said.
“The market is telling the world, we need more soybean acres,” he said.
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