Grain Crop Estimates Bring Out Bulls
The bulls are back, but they’re running on Jackson Boulevard rather than Wall Street.
Drought losses overseas and new projections of smaller-than-expected crops in the United States have fueled a frenetic rally in grain prices in recent days, giving long-depressed U.S. grain farmers a boost.
Buoyed by revised U.S. Agriculture Department crop estimates and big grain orders from China and Spain, grain prices at the Chicago Board of Trade on Wednesday added to a two-week rally. And there should be more to come, many analysts said.
Soybean futures for November delivery jumped 7 cents to $5.03 a bushel Wednesday, the highest closing price in six months.
Corn futures for current-month delivery gained 8 cents to $2.17 a bushel, also the highest in six months. Wheat and oat futures also were up sharply.
“It’s a light at the end of the tunnel,” said Bart Ruth, a corn and soybean farmer in Rising City, Neb., and a board member of the American Soybean Assn. “Demand is outpacing supply at this point. Amazing that we have a record crop and can consume it in one year.”
Terry Francl, senior economist with American Farm Bureau Federation, said, “Farmers were holding corn and wheat and waiting for a summer rally to sell. We’re in that process now. The current trend is a welcome development.”
U.S. grain farmers had suffered with falling or flat prices for much of the last three years amid large U.S. crops and healthy production by overseas farmers.
But two sets of reports from the USDA over the last two weeks have changed the long-bearish mood of the grain markets and farmers. The reports have projected lower-than-expected grain stocks in the United States at the same time that key producers such as China, Canada and the European Union are facing smaller crops.
Fears that drought damage could cut grain exports from those countries got a powerful boost Wednesday. The USDA said exporters had reported a sale of 165,000 metric tons of U.S. corn to China, whose aggressive exports of corn in recent years have cut into U.S. market share in Asia.
The USDA sent a second shock wave to the markets by announcing a sale of 100,000 tons of U.S. wheat to Spain, more evidence that drought in Spain and France this year will make Europe a surprise source of demand.
The European Union has long been a top competitor for U.S. wheat export sales and a target for U.S. officials who have attacked the EU’s subsidized wheat sales.
A USDA official in Washington said Wednesday that the sale of corn to China “caught us by surprise, to say the least,” adding that China’s harvest was just starting.
Chinese officials said this week that drought in the northern Chinese plains, especially in Heilongjiang province, was “severe” and had not been broken by recent rains. That province produces a third of China’s soybeans.
“I suspect this is only the tip of the iceberg,” the USDA official said of the corn sale.
Meanwhile, projections for hotter weather moving east from the Plains to the western U.S. Corn Belt by early next week have sparked heavy speculative buying of grain futures as some traders bet that U.S. crops could be even smaller than estimated.
Hot and dry weather will pose a threat during the key growing stages of pollination for corn and flowering for soybeans in the Midwest in the next few weeks.
