Weather Concerns Drive Up Grain Prices
Wheat and corn prices soared 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.
Buoyed by price gains in grains and petroleum, The Knight Ridder-Commodity Research Bureau’s index of 17 commodity futures hit an eight-year high on Wednesday for the fifth straight session at 259.10, up 2.38 points.
Wheat at the Chicago Board of Trade for delivery in May through next March closed up the 20-cent per bushel daily trading limit. May futures ended at $5.49 3/4 per bushel, up 5% since Friday and 17% since March 19.
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 boosted demand for U.S. grains at a time when government policies had 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.
“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.
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.
“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.
