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Corn, Soy Will Rise as Prices Haven’t Cut Demand, Rabobank Says

Corn and soybeans will rise through the second quarter this year as high prices haven’t rationed demand for the commodities, Rabobank said.

Rising corn, soybean and wheat prices haven’t discouraged buyers from purchasing the grains as countries seek to curb food-price inflation, the bank said today in a report. Corn has surged 90 percent in the past year, soybeans have jumped 51 percent and wheat is up 71 percent. Importing countries also may be seeking to hedge against further price appreciation, according to the report.

Corn prices will rise to $7.25 a bushel and soybeans will jump to $15 in the second quarter, Rabobank said. Excessive rainfall in Australia and Canada and drought in Russia have curbed production of staple crops such as wheat and corn, and political strife has sparked demand as leaders attempt to ensure supply.

“Higher prices are likely for most agri-commodity markets over the coming months given the bullish risks which remain in the market,” Rabobank said. “Key to our continued bullish outlook is a lack of any meaningful demand rationing thus far, despite prices reaching such elevated levels.”

Corn futures for May delivery rose 2.75 cents, or 0.4 percent, to $7.1225 a bushel, soybeans gained 5.75 cents to $14.3875 a bushel, and wheat added 7.25 cents, or 0.8 percent, to $8.70 a bushel at 9:01 a.m. London time on the Chicago Board of Trade.

Ethanol, made from corn in the U.S., may beat Department of Agriculture forecasts for production, as blending is profitable as long as corn futures on the Chicago Board of Trade remain below $7.50 a bushel, according to the report. Corn will lead the grains higher and will need to reach records to encourage growers to plant more, the bank said.

‘New Highs’

Soybean production will fall 7 million metric tons to 253 million tons in the current marketing year, Rabobank said. The USDA has forecast output to fall 4.5 million tons. Prices may reach “new highs” to ration demand for the oilseeds, which have gained partly on purchases by China, according to the report.

Wheat will gain after the worst drought in a half-century damaged crops in Russia and floods in Australia curbed production, Rabobank said. Half of Australia’s 24 million-ton output will be downgraded from food-quality wheat to feed- quality, which “further compounds the tightness in the world’s quality milling wheat supplies,” Rabobank said.

To contact the reporter on this story: Tony Dreibus in London at tdreibus@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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