July 30 (Bloomberg) -- Corn surged to a record, heading for the biggest monthly gain since 1988, as the worst drought in at least a generation threatened yields in the U.S., the world’s top grower. Soybeans and wheat also rallied.
Iowa, Illinois and western Indiana had less than half of the normal amount of rain in the past 30 days, National Weather Service data show. The Midwest may be mostly dry until the weekend, when storms bring 0.5 inch (1.3 centimeters) to some areas, Telvent DTN said. Analysts including Goldman Sachs Group Inc. and Macquarie Group Ltd. have said yields will trail government estimates after heat and dry weather intensified as plants matured.
“The harshness of the situation is setting in,” said Peter Meyer, a senior director for agriculture commodities at PIRA Energy Group in New York, who toured fields from Indiana to Minnesota last week. “The severity of the drought in Iowa is eye-opening, and now we’re getting reports that Minnesota is no good, and Nebraska is a mess,” he said in a telephone interview.
Corn futures for December delivery climbed 2.6 percent to close at $8.14 a bushel at 2 p.m. on the Chicago Board of Trade, a record settlement. Earlier, the price reached an all-time intraday high of $8.1775. The most-active contract has surged 28 percent in July.
At the end of June, moderate to extreme drought covered the largest area of the contiguous U.S. since 1956, according to the National Climatic Data Center. The Midwest drought may spark a rebound in world food costs, the United Nations said on July 5.
Corn yields may be as low as 126 bushels an acre, Goldman Sachs said on July 23. On July 11, the U.S. Department of Agriculture forecast 146 bushels, reducing its projection from a record 166 bushels in June. The agency will update its crop forecasts on Aug. 10.
Corn production already is below 11 billion bushels because of the drought, PIRA Energy’s Meyer said. That’s down from a USDA forecast this month of 13 billion. Growers last year collected 12.4 billion, according to the government. South America and the Black Sea region will export more corn and soybeans as the drought curbs U.S. production, Bunge Ltd. said last week.
Soybeans nearing critical stages of development need rain in a week to 10 days to avoid further deterioration, Meyer said.
“We’re relying on some extra moisture to save the soybean crop,” he said. “We have heat building in the next two weeks. Soybeans have seven to 10 days, and the moisture looks like about a quarter- to a half-inch. It’s pretty bad.”
Soybean futures for November delivery gained 2.6 percent to $16.435 a bushel. The oilseed, which reached a record $16.915 on July 23, has climbed 15 percent in July.
The U.S. drought will cause food-price volatility that may expand hunger to the poor around the globe, threatening social stability, World Bank President Jim Yong Kim said in a report today.
Wheat futures for September delivery rose 1.8 percent to $9.145 a bushel. The grain, which can replace corn in livestock feed, has surged 21 percent this month.
ProZerno, a Moscow-based consulting company, cut its estimate on Russian wheat output to 44 million to 45 million metric tons from a projection of 54.2 million in May because of drought.
French Agriculture Minister Stephane Le Foll said on July 28 that the surge in grain and soybean prices is a “major preoccupation” worldwide, and agricultural leaders may need to hold a formal meeting to discuss the issue if drought worsens in the U.S. and Russia.
“There are still concerns over the Russian wheat crop,” said Victor Thianpiriya, an agricultural analyst at Australia & New Zealand Banking Group Ltd. “The substitutes for corn are looking tight as well.”
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