Crop traders extend bullish streak on U.S. drought

July 20 (Bloomberg) -- Corn and soybean traders are bullish for a 13th consecutive week on mounting concern that yields will keep dropping amid the worst U.S. drought in a half century.

Twenty analysts surveyed by Bloomberg expect soybeans to climb next week, after reaching a record yesterday. A further five were bearish and three neutral. Nineteen predicted gains in corn, five saw a decline and three anticipated little change. Hedge funds are holding the biggest bet on rising soybeans since the beginning of May and the largest wager on corn since April, U.S. Commodity Futures Trading Commission data show.

The drought may persist in the Midwest for the rest of the growing season, the U.S. government said this week. Above- average temperatures and below-normal rainfall will continue through next week, according to meteorologist Telvent DTN. The 55 percent jump in corn and 28 percent gain in soybeans since mid-June may spur another bout of global food-price inflation, after surges in 2008 and 2011 that sparked civil unrest in developing countries, Barclays Plc said in a report July 18.

“There’s not much reason for us to see a slowdown in the price rally,” said Erin FitzPatrick, an analyst at Rabobank International in London, who predicted in April that soybeans would reach a record. “The size of the 2012-13 harvest is shrinking every day that we don’t get rain or a cooling off in the U.S. It’s fundamentally still bullish, even though we’re at these record prices.”

Prices Rally

Soybeans advanced 39 percent to $16.7275 a bushel on the Chicago Board of Trade this year and reached a record $16.8275 today. Corn rose 22 percent to $7.855 a bushel, touching $7.99 yesterday, less than 0.1 percent below its all-time high. The Standard & Poor’s GSCI gauge of 24 commodities rose 0.6 percent since the start of January and the MSCI All-Country World Index of equities gained 4.6 percent. Treasuries returned 2.6 percent, a Bank of America Corp. index shows.

More than half of the contiguous U.S. states were in moderate to extreme drought at the end of June, the highest percentage since December 1956, according to the National Climatic Data Center. Thirty-one percent of the U.S. corn crop was in good or excellent condition as of July 15, the least for the date since 1988, according to the U.S. Department of Agriculture. Thirty-four percent of soybean fields received the top ratings, also the worst since 1988.

Lower Harvest

The USDA cut its forecast for this year’s U.S. corn harvest by 12 percent to 12.97 billion bushels on July 11, down from a June estimate of 14.79 billion bushels. The agency reduced its soybean projection by 4.8 percent to 3.05 billion bushels. Morgan Stanley predicted yesterday corn output at 11.89 billion bushels and soybean production at 2.99 billion bushels.

China may import a record 61 million metric tons of soybeans and 5 million tons of corn in the 2012-13 season, the USDA said July 11. The Asian nation is the world’s biggest soybean consumer and second-largest user of corn after the U.S. While China’s growth will slow to 8 percent this year from 9.2 percent in 2011, that’s still more than double the anticipated expansion globally, the International Monetary Fund estimates.

The surge in crops is raising costs for livestock farmers who use them as feed. That may spur them to slaughter more animals, lowering U.S. retail prices for meat that are at or near a record. Goldman Sachs Group Inc. cut its outlook for livestock prices on July 16 and forecasts soybeans at $16.25 in three months and corn at $6.90.

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