(Bloomberg) — Corn futures soared by the most since June after the US Department of Agriculture delivered a bigger-than-anticipated reduction in yield as hot weather impacts America’s top crop.
Futures climbed by as much as 4.6% in Chicago. Prices for corn surpassed gains in wheat, which was already surging earlier Wednesday with an attack on a key Russian grain port adding to concerns that an escalating conflict between Ukraine and Russia will disrupt exports from the Black Sea region.
Heat waves across the Northern Hemisphere in recent months have been stressing grain fields, prompting analysts to cut back harvest estimates in the US and across much of Europe.
The USDA estimated the US corn yield at 180.7 bushels per acre, down from 183 last month and off sharply from last year’s record of 186.5. Still, production will rise slightly to 16.013 billion bushels, the second-biggest US harvest ever as some states including top grower Iowa will have record yields, according to the agency’s monthly outlook.
The US agency has been aiming to improve its analysis, including use of satellite imagery and their own field checks to supplement tens of thousands of surveys sent to farmers, who have been replying less often to those inquiries.
The USDA also raised its acreage forecast for corn. That marks a change from last season, when a major revision was made in January. That may help improve the standing of the forecast, after reports a year ago and in January sent corn prices crashing.
“This re-vamped survey methodology found more acres, earlier,” Bloomberg Intelligence analyst Alexis Maxwell said. “For a market still stung by last year’s multiple, late-in-season revisions, this report marks initial steps into revitalizing confidence with USDA forecasts.”
Typically, the market begins to turn its attention to demand as the supply side becomes more known with maturing crops. The USDA making bigger changes earlier in the season could prompt the market to focus more on worsening disruptions on the demand side.
AgResource Co. in a note said the USDA report was “bullish,” with it “helping to confirm that a longer bottom was scored in late June.”
Given the recent strikes in the Black Sea, the USDA trimmed its outlook for top shipper Russia’s wheat exports by 500,000 tons, and reduced Ukraine’s by 1 million. The two countries account for about a quarter of global wheat exports.
US wheat output, already forecast to be the lowest since the 1970-71 season, was trimmed slightly on weaker yields.
Growers in the US also increasingly favor corn and soybeans amid big programs for blending biofuels made from corn and soy with traditional petroleum-based fuels. With wheat losing ground, combined acres of corn and soybeans are the biggest ever, according to the USDA.
In soybeans, the USDA trimmed the US yield but lifted its production estimate to reflect more acres. The agency made no changes to its outlook for US soybean exports even as it earlier reported the latest sale of American supplies to China.
–With assistance from Dominic Carey.
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