CBOT

U.S. corn soars to record as crop flooded

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CHICAGO (Reuters) – U.S. corn futures soared more than 4 percent to a fresh record high for the fifth consecutive trading session on Wednesday as flooding expanded in the U.S. Midwest, harming the 2008 corn crop.

“There’s still no indication that we’re getting ready to change this pattern. Concerns continue from planting issues to emergence to crop development,” Mike Palmerino, forecaster for DTN Meteorlogix, said.

Corn prices on the Chicago Board of Trade have surged 80 percent over the past year, with nearly 17 percent of that tacked on just this month.

Soybeans surged 3 percent and wheat leaped nearly 5 percent as those markets followed corn, but the historic rainfall and flooding in the United States also were beginning to hurt soy and wheat crop prospects.

“There is definitely concern. There is way too much water and, even if it is drier next week, it won’t matter now. It’s too late to plant corn and even bean yields are being affected,” Vic Lespinasse, an analyst for GrainAnalyst.com, said.

Corn prices rallied the daily trading limit of 30 cents per bushel early in the session and the new-crop July 2009 contract soared to a record $7.56-1/4, surpassing the record of $7.35 set in during Asian trading hours.

By midday, U.S. corn for July 2008 delivery was locked up the 30-cent limit at $7.03-1/4 per bushel.

The U.S. Department of Agriculture this week slashed 5 bushels per acre from its estimate for U.S. corn yields because of excessive rainfall and flooding in key corn states, including top producers Illinois and Iowa.

Now there are ideas that yields and corn acreage will fall further because it keeps raining. This season has come the closest to the historic flood in summer 1993.

“That’s the year everyone is looking at as a comparison,” Palmerino said.

That summer the U.S. Midwest suffered from heavy flooding after weeks of rain that eventually caused the Mississippi River, a major North American river and grain shipping artery, to flood, washing out surrounding corn and soybean fields.

“The size of the corn crop is coming down, and maybe the wheat crop too,” said Chicago cash merchant Glenn Hollander of Hollander-Feuerhaken.

U.S. wheat markets leaped to keep up with corn and now the maturing winter wheat crop is being threatened by the rains.

Wheat for July delivery was up 58 cents per bushel at $8.67 per bushel at midday, nearing its 60-cent trading limit.

European grain markets followed the trends at the CBOT, extending their early rally. In Paris, the benchmark November wheat contract settled up 12.75 euros, or 6.6 percent, at 205 euros a tonne, after hitting 205.25 euros, its highest level since April 17.

“If you look at corn prices, wheat can only rise. We can’t have wheat cheaper than corn,” a European trader said.

U.S. traders said the excessive wet weather in the U.S. crop region was the main driver of the markets, but they also tied some of the gains to a strong rebound in crude oil and gold as the dollar fell.

“More rain is exactly what we don’t need, and today we have the added support from crude oil being up,” Lespinasse said.

U.S. soyoil, a key resource for the biodiesel industry, soared following crude oil, and soybean futures held to their own limit gains.

U.S. soy for July delivery was up its limit of 70 cents at $15.16-1/2 per bushel.

(Additional reporting by Christine Stebbins in Chicago and Sybille de La Hamaide in Paris; Editing by Walter Bagley)

By Sam Nelson
Wed Jun 11, 1:20 PM ET

Source: Reuters

How Japan Helped Ease the Rice Crisis

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Prices quickly fell on Tokyo’s call to tap into its huge reserves. But how did the stash get so big, and why does rice-rich Japan import the staple?

With prices now falling, the global rice crisis seems to be subsiding. That’s thanks in part to a policy announcement by a Japanese bureaucrat. On May 19, Japan’s Deputy Agriculture Minister, Toshiro Shirasu, said that Tokyo would release some of its massive stockpile of rice to the Philippines, selling 50,000 tons “as soon as possible” and releasing another 200,000 tons as food aid. The first shipment could reach the Philippines by late summer. Shirasu also left open the possibility of using more of its reserves to help other countries in need.

To understand Japan’s role in deflating the rice market, it helps to visit the warehouses rimming Tokyo Bay. It’s here in temperature-controlled buildings that Japan keeps millions of 30-kilogram vinyl bags of rice that it imports every year. Tokyo doesn’t need rice from the outside world: The country’s heavily subsidized farmers produce more than enough to feed the country’s 127 million people. Yet every year since 1995, Tokyo has bought hundreds of thousands of metric tons of rice from the U.S., Thailand, Vietnam, China, and Australia.

A Rice Imbalance

Why does Japan buy rice it doesn’t need or want? In order to follow World Trade Organization rules, which date to 1995 and are aimed at opening the country’s rice market. The U.S. fought for years to end Japanese rice protectionism, and getting Tokyo to agree to import rice from the U.S. and elsewhere was long a goal of American trade policy. But while the Japanese have been buying rice from farms in China and California for more than a decade, almost no imports ever end up on dinner plates in Japan. Instead the imported rice is sent as food aid to North Korea, added to beer and rice cakes, or mixed with other grains to feed pigs and chickens. Or it just sits in storage for years. As of last October, Japan’s warehouses were bulging with 2.6 million tons of surplus rice, including 1.5 million tons of imported rice, 900,000 tons of it American medium-grain rice.

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Wall Street Grain Hoarding Brings Farmers, Consumers Near Ruin

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April 28 (Bloomberg) — As farmers confront mounting costs and riots erupt from Haiti to Egypt over food, Garry Niemeyer is paying the price for Wall Street’s speculation in grain markets.

Commodity-index funds control a record 4.51 billion bushels of corn, wheat and soybeans through Chicago Board of Trade futures, equal to half the amount held in U.S. silos on March 1. The holdings jumped 29 percent in the past year as investors bought grain contracts seeking better returns than stocks or bonds. The buying sent crop prices and volatility to records and boosted the cost for growers and processors to manage risk.

Niemeyer, who farms 2,200 acres in Auburn, Illinois, won’t use futures to protect the value of the crop he will harvest in October. With corn at $5.9075 a bushel, up from $3.88 last year, he says the contracts are too costly and risky. Investors want corn so much that last month they paid 55 cents a bushel more than grain handlers, the biggest premium since 1999.

Read moreWall Street Grain Hoarding Brings Farmers, Consumers Near Ruin