Forexpros – U.S. grain futures were broadly higher on Friday, as ongoing concerns over the impact of drought-like conditions on crops in the U.S. Midwest and Great Plains-region continued to boost prices.
Escalating concerns over scorching heat and dry weather conditions in key grain-growing regions in the U.S. have been fuelling a recent rally in grain prices.
Corn has gained nearly 26% since June 1, wheat prices surged approximately 25%, while soy rose 20% in the period.
Weather forecasts on Friday showed that some relief rains are expected throughout the Northern Plains over the weekend, but hot weather was likely to keep stress on U.S. Midwest corn and soybean crops for at least the next few
Wall Street investment bank Goldman Sachs raised its price forecast for corn, soybeans and wheat in a report earlier in the week, citing worsening drought conditions in the U.S. Midwest.
U.K. lender Barclays also raised its price forecasts for the three crops due to the drought, the bank said in a report.
On the Chicago Mercantile Exchange, corn futures for September delivery settled at USD7.4238 a bushel by close of trade on Friday. Earlier in the day, prices hit USD7.4787 a bushel, the highest for the September contract since September 13, 2011.
On the week, the September corn contract surged 3.85%.
Corn prices have been well-supported in recent sessions amid concerns dry soil in the U.S. corn-belt could strain the development of crops in the region, just as it enters its key pollination phase in the next few weeks.
On Wednesday, the USDA slashed its forecast for this year’s corn yield by 12% to 146 bushels an acre from a previous estimate of 166 bushels. Analysts on average had expected the USDA to project a yield of 154.1 bushels an acre.
The agency said it now expected the U.S. corn crop to total 12.97 billion bushels, down from its June outlook for a record 14.79 billion bushels.
According to weekly crop progress data from the USDA, corn crop ratings in the U.S. declined to the lowest levels for this time of year since 1988 last week.
The next few weeks will be important for the grain, as the crop could face bigger losses if more rain doesn’t come during its pollination phase.
The U.S. produced 38% of the world’s corn last year, making it the both world’s largest corn producing nation and the largest exporter of the grain.
Elsewhere on the Chicago Board of Trade, soybeans for August delivery settled at USD15.9612 a bushel by close of trade Friday. The August contract rose to a contract high of USD16.2500 a bushel on July 9.
On the week, August soy prices added 0.35%.
The USDA cut its yield forecast for the soybean crop to 40.5 bushels per acre from 43.9 bushels per acre. Analysts on average had expected the report to show a decline to 42.3 bushels an acre.
U.S. soybean production was now expected to total 3.05 billion bushels in the current marketing year, nearly 5% lower than the 3.205 billion bushels the USDA predicted in June.
Soy futures have gained sharply in recent weeks, as the same hot, dry weather that boosted corn was seen benefitting soy futures as well. Soybeans are grown in many of the same regions across the U.S. as corn.
The oilseed will begin flowering in late July to early August, a crucial development stage when stressful weather can severely damage yields.
Global soybean supplies are already on the decline, as severe drought conditions earlier in the year in major South American growers Brazil and Argentina damaged crops in the region.
Meanwhile, wheat for September delivery settled at USD8.4662 a bushel by close of trade on Friday. Earlier in the day, prices hit USD8.6550 a bushel, the highest since February 15, 2011.
On the week, the September wheat contract jumped 3%.
The USDA cut its forecast for domestic wheat inventories at the end of the 2012-13 marketing year to 664 million bushels, below expectation of 725 million.
The agency also estimated total U.S. wheat production this year at 2.22 billion bushels, slightly below expectations for 2.25 billion.
Wheat futures have rallied sharply in recent weeks, tracking strong gains in corn and amid concerns over a disruption to supplies from the Black-Sea region.
The USDA reduced its projection of the wheat crop in Russia by 4 million tons due to poor yields.
Russia is a major wheat exporter and competes with the U.S. for business on the global market. A downbeat Russian crop outlook could boost demand for U.S. supplies, which is the world’s third largest wheat producer and biggest exporter.
Corn is the biggest U.S. crop, valued at USD66.7 billion in 2010, followed by soybeans at USD38.9 billion, government figures show. Wheat was fourth at USD13 billion, behind hay.
In the week ahead, grains traders will focus on the USDA’s weekly crop progress report on Monday, as well as Thursday’s weekly exports data.
Corn and soybean traders will continue to pay close attention to weather conditions in the U.S. Midwest and Great Plains-region.
Meanwhile, wheat traders will focus on hot weather in the Black Sea region, amid concerns over crop conditions in Russia and Ukraine.
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