(July 20 2012)
U.S. soybeans surged two percent on Friday to hit record levels for the third day in a row as hot, dry conditions continued to threaten the drought-stressed crop in America’s Midwest. Corn prices equaled their record set on Thursday; corn prices are now up 50 percent in the past two weeks alone.
The heat has left corn and soybean traders almost unanimously bullish on the future of corn and soybean prices. According to a Bloomberg survey, corn and soybean traders are betting on higher prices for the 13th consecutive week. All twenty analysts surveyed expect soybeans to climb next week. In terms of corn prices, nineteen analysts expect corn prices will gain next week, three expect corn prices to remain little changed while five analysts expect a decline. According to U.S. Commodity Futures Trading Commission data, hedge funds are holding the biggest bet on rising soybeans since the beginning of May and the largest wager on corn since April.
At a time when a bumper corn crop is needed to replace dwindling stockpiles, the USDA continues to revise down its forecast for this year’s harvest. On July 11th, the USDA cut its forecast for this year’s U.S. corn harvest by 12 percent to 12.97 billion bushels, and reduced its soybean projection by 4.8 percent to 3.05 billion bushels.
The drought that is ravaging crops is showing little signs of abating, and further losses are likely. The U.S. Midwest is enduring its worst drought since 1956, with about half the region in “severe to exceptional” drought conditions. The National Oceanic and Atmospheric Administration Forecasters are predicting hotter-than-normal temperatures through at least October.
Low stockpiles and rising costs are causing grain-exporting nations to scale back export sales, which has already sparked concerns of another food crisis. The surge in prices is also raising costs for livestock farmers, which may cause them to slaughter more animals- and in turn, lower U.S. retail prices for meat that are near record highs.