Weather Concerns Drive Grains Higher
Corn and wheat prices soared anew Wednesday on weather worries about this year’s vital U.S. crops, prompting rallies in other grain and oil-seed markets and pushing commodity price indexes to fresh eight-year highs.
“No one is selling, it’s just a powerful market,” said Ron Kucha, a grain trader at O’Connor and Co.
The continuing grain bull market helped push the Knight Ridder-Commodity Research Bureau’s index of 17 key commodity futures up 3.09 points, or 1.2%, to an eight-year high of 258.91 on Wednesday. The index has risen 6.5% this year.
Wheat futures at the Chicago Board of Trade jumped their 20-cent per bushel daily trading limit, with May futures ending at $5.49 3/4 per bushel, up 5% just since Friday.
Contract highs were set across the board for CBOT wheat, corn, soybeans and soybean meal futures. Wheat futures in Kansas City and Minneapolis also posted limit gains.
Grain prices have been on an up trend since late 1994, as crop failures overseas have boosted demand for U.S. grains at a time when government policies have steadily shrunk grain stockpiles.
The United States is the leading exporter of wheat and corn to world markets, so all eyes are on U.S. crop prospects for 1996.
Buying was set off on Wednesday by new forecasts for dry, hot and windy weather in much of the U.S. High Plains, where the bulk of the American winter wheat crop is grown.
“It’s unbelievable, what else can you say? Wheat is not going to break until it rains,” said Steve Bruce of E.D. and F. Man International.
“The driest areas of the HRW [hard red winter wheat] belt will see no relief from prolonged drought conditions,” said Weather Services Corp. meteorologist Mike Palmerino.
Temperatures will also rise above 80 degrees Fahrenheit again on Thursday from Texas to Kansas, with winds also a threat.
“This further deteriorates crop conditions, which are already at historically low levels,” Palmerino said.
Widespread talk circulated that many winter wheat fields were being abandoned already or plowed under due to poor germination or “winterkill” freeze damage. Winter wheat is planted in the fall, goes dormant in winter and revives in spring.
The U.S. Agriculture Department said late Monday that 40% of the winter wheat crop was in poor condition as of Sunday. A year ago, only 5% was rated in poor condition.
Foreign buyers remain pinched by low world stocks and continue buying up U.S. grains nervously. Egypt bought 250,000 metric tons of U.S. wheat on Wednesday despite the prices.
Weather worries and exports also drove corn, the largest U.S. crop, to a sixth day of record highs on Wednesday.
May delivery corn at the CBOT closed 9 1/2 cents a bushel higher at $4.44 1/2 after setting another all-time high for a CBOT corn contract on Wednesday morning at $4.46 1/2.
South Korea and Taiwan have kept buying U.S. corn this week despite the prices and talk that China may soon sell some corn from precious stockpiles to cash in on the prices.
