Corn surged to a record approaching $8 a bushel on signs that global inventories will drop as adverse weather slashes acreage in the U.S., the world’s top producer, and demand rise for livestock feed and ethanol.
Worldwide stockpiles will be 111.89 metric million tons before the 2012 harvest in the Northern Hemisphere, the U.S. Department of Agriculture said yesterday. That was down from 129.14 million forecast in May and 117.44 million that the agency says will be in storage by Oct. 1. U.S. supplies before the 2012 harvest were estimated at the lowest since 1996.
Prices have more than doubled in the past year as wet weather limited the size of the 2010 U.S. harvest. Flooding in the past two months delayed planting and threatened this year’s crop prospects. The rally is boosting expenses for meat producers including Tyson Foods Inc. and makers of grain-based ethanol such as Poet LLC. Global food costs climbed in nine of the past 11 months, reaching a record in February.
“The USDA told the markets yesterday that corn supplies will stay tight for another year,” said Brian Grete, the senior market analyst for the Professional Farmers of America newsletter in Cedar Falls, Iowa. “Now, we have a long-term story of tight supplies, and that means higher prices.”
Corn futures for July delivery rose 1.5 cents, or 0.2 percent, to settle at $7.87 at 1:15 p.m. on the Chicago Board of Trade. Earlier, the price reached a record $7.9975. The previous all-time high was $7.9925 in June 2008. This week, the price jumped 4.4 percent.
Food Riots, OPEC
Food-price inflation and high unemployment helped spur unrest in northern Africa and the Middle East this year. Energy costs have surged amid fighting in Libya, a member of the Organization of Petroleum Exporting Countries. This week, OPEC failed to reach an accord on production targets.
The U.S. corn harvest may be 2.3 percent smaller than forecast in May after heavy Midwest rains left fields too wet for sowing, the government said yesterday.
Planted acreage was forecast at 90.7 million acres, down 1.6 percent from last month’s projection. In a survey released in late March, farmers indicated they planned to sow 92.178 million acres with corn this year. The USDA will update its estimate of farmers’ intentions in a report on June 30.
More than a third of Midwest fields were planted after the mid-May target for optimal growth because of excessive rain, and Ohio farmers as of June 5 were the furthest behind since 1989, with 58 percent sown, government data show.
Floods damaged as much as 6.8 million acres of farmland across the South and Midwest, according to the U.S. Army Corps of Engineers.
“We came into this year needing to produce a record crop to build inventories,” said Bill Gentry, a broker at Risk Management Commodities Inc. in Lafayette, Indiana. “Cash markets are on fire trying to get supplies.”
In the week ended June 3, U.S. ethanol production rose 0.7 percent to an average of 915,000 barrels a day, the highest since January, government data showed. On May 4, the national average of regular gasoline at the pump reached $3.985 a gallon, the highest since July 2008, according to AAA, a U.S. motoring organization.
A record 5 billion bushels of corn will go into ethanol production in the year that ends Aug. 31, the USDA said yesterday. That’s 40 percent of last year’s harvest.
“Ethanol production is rising, and we are not building inventories,” Gentry said. “There are no signs yet that demand for corn is slowing with the higher prices.”
Corn is the biggest U.S. crop, valued at $66.7 billion in 2010, government figures show.
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