Crop Prices Seen Climbing by Societe Generale on U.S. Heat

Corn and soybean markets face “upside price risks” as hot weather in the U.S. may reduce yields, Societe Generale SA said.

Corn may average $6.26 a bushel in 2012 if yields in the U.S. average 161.4 bushels an acre, the bank said today in an e-mailed report. The U.S. Department of Agriculture has projected yields of 166 bushels an acre. Soybeans may average $14.02 a bushel if yields are 43.4 bushels an acre, Societe Generale said. That compares with the USDA’s forecast of 43.9 bushels an acre. The bank said it may adjust both yield and price estimates because of weather concerns.

“Recent weather has already taken its toll on the corn crop,” Christopher Narayanan, Societe Generale’s head of agricultural research in New York, wrote in the report. “Given the current and forecasted weather risks, the large replenishment of supplies expected this autumn could easily fall short and raise prices above our current forecasts.”

Corn surged 10 percent yesterday and today after the USDA cut its ratings for crop conditions in the nation. The grain reached $5.5725 a bushel by 10:36 a.m. today on the Chicago Board of Trade. Soybeans gained 5.5 percent in the same span to $13.86 a bushel.

Prospects for soybean supplies may be “even more dire” than for corn because global inventories of the oilseed are already tight following drought that reduced harvests in South America, Narayanan wrote.

“While we will continue to monitor weather and crop conditions for the time being, the chances are increasing for us to adjust our yield, and ultimately price, forecasts,” he wrote. “We maintain a bearish outlook on U.S. corn and soybean production and, as a result, see more upside, rather than downside, risk to our current price forecast.”

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