June 26, 2012 / 11:49 AM / 7 years ago

GRAINS-Corn jumps on US Midwest drought, up 12 pct in two days

* December corn up 3 pct on hot and dry Midwest
    * USDA cuts weekly crop ratings for corn, soybeans
    * Soy, wheat lower after jumps on Monday

 (Updates U.S. market activity to close, adds new analyst quote)
    By Michael Hirtzer
    CHICAGO, June 26 (Reuters) - U.S. corn futures soared 5
percent to an eight-month high o n T uesday, capping the biggest
two-day rally in more than a year, as unrelenting heat and
dryness in the U.S. Midwest threatened deepening damage to a
once-record crop.
    Midday weather forecasts for light showers this weekend in
the northern U.S. Corn Belt helped temper soybeans, which eased
from an earlier contract high, but did little to alleviate fears
of ultra-low late-summer corn supplies. A U.S. Department of
Agriculture report on Friday may cut its forecast for the
tightest ending stocks in 16 years.
    "The grains, of course, are on fire as hot -- very, very hot
-- temperatures and very little rain in the all-important U.S.
Midwest are having their bullish way with prices," investor
Dennis Gartman said in his letter to clients.
    "We should, at the moment, understand that the corn market
is in far greater danger than is the soybean crop, for corn is
tasselling or soon shall be, and that is the most vulnerable
period of the year," Gartman said.
    Corn futures for December delivery, the most active
grains contract at the Chicago Board of Trade, have gained 12.5
percent this week, the most for a December contract since 2009,
settling on Tuesday up 30 cents at $6.24 per bushel.
    CBOT July wheat also notched an eight-month top,
shaking off losses earlier in the trading session, to close
4-3/4 cents higher at $7.29 per bushel after the Russian
government cut the size of the crop in the No. 3 biggest wheat
exporter.
    New-crop November soybeans ended down 12-1/4 cents at
$14.13-1/4 per bushel as profit-taking pressured futures after
they posted a contract high of $14.38-3/4.
    USDA's weekly report late Monday showed conditions of the
corn and soybean crops were worse than analysts had expected,
the lowest for this time of year since 1988, when one of the
most damaging droughts in U.S. history decimated crop yields.
    
 
    
    The midday update of the American weather model was a little
wetter for the northern Midwest for the weekend and a little
drier for farms west of the Mississippi River, said David
Streit, agriculture meteorologist with Commodity Weather Group.
    "But there weren't any major shifts," added Streit.
    Temperatures in the 90s to 100s degrees Fahrenheit (32 to 38
degrees Celsius) are likely Wednesday and Thursday.
    "That coincides with the onset of pollination for 20 percent
of the national corn producing area from Kansas though Missouri
and into central and southern Illinois," Streit said.
        
    CORN RATINGS AT 24-YEAR LOW
    USDA's weekly crop ratings rated U.S. corn 56 percent good
to excellent as of Sunday, down 7 percentage points from a week
earlier and well below a 61 percent average estimate in a
Reuters poll. Soybeans were 53 percent good to excellent, down
from 56 percent a week earlier.  
    Corn ratings have fallen for three straight weeks, cutting
expectations for a bumper crop this autumn, which the market was
relying on to replenish tight U.S. stocks.
    Mike Zuzolo, analyst and broker at Global Commodities
Analytics in West Lafayette, Indiana, said the conditions were
so bad that some farmers were worried about making commitments
to delivering grain at harvest this autumn. 
    "There's two things happening. Crop insurance adjusters are
out and clients are buying back grain sales," Zuzolo said.

 Prices at 4:00 p.m. CDT (2100 GMT)      
                              LAST      NET    PCT     YTD
                                        CHG    CHG     CHG
 CBOT corn                  646.00    15.00   2.4%   -0.1%
 CBOT soy                  1470.50   -12.00  -0.8%   22.7%
 CBOT meal                  427.20    -5.60  -1.3%   38.1%
 CBOT soyoil                 50.88    -0.39  -0.8%   -2.3%
 CBOT wheat                 729.00     4.75   0.7%   11.7%
 CBOT rice                 1477.00     8.50   0.6%    1.1%
 EU wheat                   225.50     0.50   0.2%   11.4%
 
 US crude                    79.45     0.24   0.3%  -19.6%
 Dow Jones                  12,535       32   0.3%    2.6%
 Gold                      1572.08   -12.00  -0.8%    0.5%
 Euro/dollar                1.2491   -0.001  -0.1%   -3.5%
 Dollar Index              82.3740  -0.1230  -0.2%    2.7%
 Baltic Freight                981        3   0.3%  -43.6%
 
 (Additional reporting by Sam Nelson and Christine Stebbins in
Chicago; Editing by Marguerita Choy, John Picinich and David
Gregorio)
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