Sizzling summer temperatures and expanding drought conditions across large sections of the United States, coupled with excessively dry weather in other key grain-producing regions, rallied U.S. grain futures prices in June and into the first week of July. Chicago December corn futures surged around $1.25 a bu in June. November soybean futures skyrocketed $1.70 a bu. And September wheat futures soared $1.03 a bu in Kansas City, $1.26 in Chicago and $1.04 in Minneapolis. U.S. grain futures registered additional wide price gains on both sides of Independence Day last week with each day’s heat and lack of rain subtracting from what just weeks earlier were seen as outstanding yield and production potentials for the nation’s corn and soybean crops.
The U.S. Department of Agriculture rated the condition of the nation’s corn crop at 79% good to excellent on May 20. But by July 1, only 48% of the crop was in good to excellent condition. The U.S.D.A. rated the nation’s soybean crop on June 3 at 65% good to excellent with 29% of the crop in fair condition. By July 1, only 45% of the soybean crop was rated in good-to-excellent condition with 33% rated fair. Continued record-breaking heat was expected to produce even weaker crop condition ratings this week.
The U.S. winter wheat harvest was 69% completed by July 1 compared with 43% as the recent five-year average for the date. The early start and rapid pace of the harvest allowed most of the winter wheat crop to survive the summer heat without severe reductions in yield. The nation’s spring wheat crop was rated 71% good to excellent on July 1 compared with 77% a week earlier. Unlike the winter wheat regions, the northern Plains received moisture in June, and only now were concerns beginning to be voiced over crop prospects should the drought expand into the key spring wheat states of the Upper Midwest.
Meanwhile, the London-based International Grains Council on July 2 further lowered its forecast for world wheat production in 2012-13. In late February, the I.G.C. provided its initial forecast for world wheat production this crop year at 680 million tonnes, which would have been down 15 million tonnes from the record world harvest of 695 million tonnes in 2011-12. As it became clear adverse weather conditions, particularly in Russia, were reducing the potential for this year’s world crop, the I.G.C. in subsequent reports lowered its production forecast. Last week, the I.G.C. forecast this year’s world wheat crop at 665 million tonnes, down 15 million tonnes from its initial outlook. In the case of Russia, the I.G.C. on July 2 reduced its wheat production forecast to 49 million tonnes from 55 million tonnes as its previous projection. The I.G.C. also lowered its production forecasts for Ukraine, Australia and Argentina.
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