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An intense heatwave is threatening havoc with this year’s US grain harvest, burning up hopes of blockbuster yields and sending prices soaring.
Even a modest reduction in crops could send ripples through global food commodities markets, as the US is the world’s top exporter of corn, soyabeans and wheat, and stocks of the first two are relatively low.
Soyabean prices have surged to the highest level since the 2007-08 food crisis and the price of this year’s corn crop has risen 30 per cent since mid-June. Worries about the size of the US crop come only months after drought hit the Latin American soyabean belt of Brazil, Argentina, Uruguay and Paraguay.
Top US farming states such as Illinois and Indiana had suffered temperatures above 38ºC (100ºF) for several days already, with no let-up this week.
“The forecast is going to remain pretty much the same over the next week. We’re not looking at much of a break in the heat,” said Matt Barnes, meteorologist at the National Weather Service’s central Illinois office.
Soyabean futures on Monday rose 1.5 per cent in early trading to $15.42 a bushel, the highest since July 2008. The oilseed price has surged 15 per cent since the beginning of June as high temperatures blanketed farm fields. Corn came within pennies of $7 a bushel for the first time since September.
“We aren’t seeing widespread failure yet, but it sure is developing rapidly,” said Brian Fuchs, climatologist at the National Drought Mitigation Centre.
The US Department of Agriculture on Monday said less than half of US corn was in good or excellent condition while 22 per cent was in poor condition, downgrading estimates from a week ago.
The shift in grain market sentiment caught traders and farmers off guard. Lulled by an early and successful planting season, money managers, such as hedge funds, one month ago had the smallest number of bullish bets on corn in two years.
The warmth that enabled farmers to plant seeds quickly has since escalated into damaging extreme heat.
“The combination of low subsoil moisture, which is a reflection of the lack of precipitation that we had during the winter, together with the very hot weather that we’re seeing right now could spell a pretty disastrous scenario for corn and soyabeans,” said Hussein Allidina, head of commodities research at Morgan Stanley.
The outcome is critical to global food prices and the agribusiness industry because the US supplies almost half of global corn exports and a third of soyabean exports. Demand for both has risen as consumers in emerging countries eat more meat.
The heatwave threatens to undermine forecasts of record output after the most widespread US corn plantings in 75 years. The Agriculture Department said that US farmers seeded 96.4m acres with corn this spring, 541,000 acres more than they told government surveyors in early March.