US Corn Sets Record As Floods Ravage Crop

June 13 2008
By Sam Nelson
Reuters

CHICAGO, June 13 (Reuters) - U.S. corn prices leaped 3 percent on Friday to set records for the seventh consecutive session as near relentless rainfall and flood waters drowned crops in Iowa and Illinois, two top producers of corn and soy.

"They are looking for crop conditions to decline. In Iowa and the southern half of Illinois and Indiana it's bad ... there will be holes in the crop," said Dan Cekander, an analyst for Newedge Trading.

Soymeal, the high-protein livestock and poultry feed supplement, rallied to a 35-year peak as floods snarled transportation and shut down soybean processing plants.

Flooding has also swamped parts of other big agricultural states, including Minnesota, Wisconsin, Michigan, Missouri and Kansas, hurting crops at a time that demand for food and fuel is soaring globally.

Corn prices have jumped 22 percent this month and are up nearly 90 percent from a year ago, putting increasing financial pressure on livestock feeders, exporters, ethanol and biodiesel makers and, ultimately, on grocery shoppers and commuters.

U.S. corn for old-crop July delivery ended up 22-3/4 cents at $7.31-3/4 per bushel, after hitting a record $7.37-1/2 per bushel, above the record $7.25-1/2 that was set on Thursday.

The new-crop July 2009 contract was closing in on $8 per bushel, after hitting a record $7.84-1/2, above the previous record of $7.73-1/2, also set on Thursday.

Soy also soared because of the threat to that crop and following a rally in soymeal to 35-year highs.

The flooding closed soy processing plants and transportation was halted on a large stretch of the Mississippi River, the major American river waterway.

Soymeal is the feed supplement preferred by many livestock and chicken feeders and demand for that feed ingredient had already been soaring before the floods hit, snarling processing and transportation.

"Nothing has changed ... the market is still bullish," said Vic Lespinasse, an analyst for GrainAnalyst.com.

Soybean prices were up 23-1/2 cents in the July at $15.60 per bushel and soymeal for July shipment rallied to the highest level for soymeal since 1973, ending up $7.00 at $409.20 per ton.

Wheat prices also rallied in an attempt to keep up with corn, but also due to a threat from water damage to some of the mature U.S. winter wheat crop and possible damage to some of the growing spring wheat in the Northern Plains.

U.S. wheat for July delivery was up more than 3.5 percent, or 31 cents, at $8.82 per bushel.

BIG ACREAGE LOSSES LIKELY

"There's a lot of uncertainty about acreage now," a trader said.

The U.S. Department of Agriculture already has trimmed 5 bushels per acre from this year's corn production and that was done before the crop conditions turned worse.

Corn and soybean production is likely to be slashed further this year as heavy rains continue to pound crop areas and flood waters keep drowning crops.

"There seems to be more concern about farmers not being able to finish soybean planting," said Mike Palmerino, a forecaster with DTN Meteorlogix.

The USDA has not yet reduced corn or soy acreage estimates, but industry experts were beginning to lower acres and yields.

Veteran grains analyst Steve Freed of ADM Investor Services late on Thursday told a weather and crop outlook conference in Chicago that there was "probably 1 to 2 million acres in this country where farmers will not produce anything" due to the flooding.

U.S. farmers planted 86 million acres of corn this year and nearly 75 million acres of soybeans, according to the USDA.

Drew Lerner, meteorologist and president of World Weather Inc, said wet weather would persist in the upper Midwest and northern Plains for the next four to five weeks. And, when it does get drier, the crops will be more vulnerable to heat stress.

"With these types of conditions I doubt whether your root systems get very deep at all. If you tend to switch to a warmer, drier pattern this summer, it will stress the crop a lot quicker," Freed said. (Editing by Walter Bagley)

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