Corn rose the most in six weeks after the government said U.S. reserves before this year’s harvest will be the smallest since 2007.
Inventories as of Aug. 31 will total 1.603 billion bushels, down 7.8 percent from the month-ago forecast of 1.738 billion, the U.S. Department of Agriculture said today in a report. The USDA also raised its estimate of the amount that will be used to make ethanol. It will jump 24 percent from last year to 4.55 billion bushels, compared with last month’s forecast of 4.4 million.
“The drop in corn supplies is a major surprise and introduces a new demand element for the market,” said Peter Meyer, an agricultural-production specialist for JPMorgan Chase & Co. in New York. “Shrinking U.S. inventories means there is little room for any production problems” from hot, dry weather in July and August, Meyer said.
Corn futures for July delivery rose 6 cents, or 1.8 percent, to $3.4425 a bushel at 10:03 a.m. on the Chicago Board of Trade. A close at that price would be the biggest gain since April 28. Before today, the most-active contract fell 18 percent this year on speculation that warm, wet weather would boost U.S. production.
Corn conditions may be declining because of too much rain in parts of the Midwest, Meyer said. Some fields from Kansas to Ohio have received more than three times the normal rain over the past month, according to data from the High Plains Regional Climate Center at the University of Nebraska in Lincoln.
As of June 6, 76 percent of the crop was in good or excellent condition, unchanged from a week earlier, the USDA said this week. Five percent of the emerged crop was rated poor to very poor, up from 4 percent the week before, the government said.
“We are receiving more and more reports about corn that doesn’t look so good compared to the condition reports issued by the USDA,” Meyer said. “Concern over crops south of Interstate 80 in the Midwest” will increase the weather premium added to corn futures, he said.
Corn is the biggest U.S. crop, valued at $48.6 billion in 2009, government figures show.