Corn Jumps to Two-Year High, Soybeans Rise as U.S. Crops Freeze

Corn surged to the highest price in almost two years and soybeans extended a rally to an eight-month high as freezing weather threatens crops in China and Canada and a prolonged drought slows planting in Russia.

Temperatures dropped below freezing overnight, damaging wheat, canola and barley in western Canada, according to World Weather Inc. Freezing weather in parts of northeast China may hurt maturing corn, the China National Grain & Oils Information Center said in e-mailed report. Russian farmers have sown 39 percent less land with winter grains than a year earlier because of dry weather, Interfax reported.

“The extent of freeze damage is a big unknown,” said Dan Cekander, the director of grain research for Newedge USA LLC in Chicago. “Demand for U.S. corn is rising because of the drop in wheat production” in other countries, Cekander said.

Corn futures for December delivery rose 17.25 cents, or 3.5 percent, to settle at $5.1325 a bushel at 1:35 p.m. on the Chicago Board of Trade, the biggest gain in two weeks. Earlier, the price reached $5.1725, the highest level for a most-active contract since Sept. 30, 2008.

Corn’s 7.3 percent rally this week was the biggest since June, and the commodity’s seven straight gains marked the longest rally since June 2008.

Soybean futures for November delivery gained 32.75 cents, or 3.2 percent, to $10.69 a bushel on the CBOT, after touching $10.72, the highest level for a most-active contract since Jan. 4. For the week, the price rose 3.7 percent, the most in two months.

Corn rose to a record $7.9925 on June 27, 2008, and soybeans climbed to an all-time high of $16.3675 on July 3, 2008.

Higher Costs

Rising grain prices will increase the costs for producers of livestock and crop-based fuel. Tyson Foods Inc., the largest U.S. meat processor, fell 6.5 percent at 2:21 p.m. in New York trading, heading for the biggest slide in 14 months. Archer Daniels Midland Co., the second-biggest U.S. ethanol producer, dropped 1.9 percent, heading for the first weekly decline in a month.

Speculative buying of corn increased today after Goldman Sachs Group Inc. forecast “further tightening” of supply as demand increases for ethanol and animal feed, said Joel Karlin, the commodity sales coordinator for Western Milling LLC in Goshen, California.

Speculator Holdings

Hedge-fund managers and other large speculators increased their net-long positions to a record in Chicago corn futures in the week ended Sept. 7, according to U.S. Commodity Futures Trading Commission data.

Net-long positions, or the difference between bets on price gains and declines, rose 6.2 percent to 401,884 contracts, the most since June 2006, when the CFTC began collecting the data.

“There’s definitely new money coming into the corn market today,” Karlin said. “Soybeans breaking out to new highs triggered fresh buying from the hedge funds and other speculators.”

Corn is the biggest U.S. crop, valued at $48.6 billion in 2009, followed by soybeans at $31.8 billion, government figures show.

--Editors: Steve Stroth, Patrick McKiernan.

source: bloomberg