U.S. grains: Corn reaches five-year high on crop uncertainty, firm cash

CBOT soybeans also firm

cbot july corn
CBOT July 2019 corn (candlestick chart) compared to K.C. July 2019 wheat (orange line). (Barchart)

Chicago | Reuters — Chicago corn futures climbed to their highest level in five years on Friday as forecasts for more showers in the eastern Midwest next week clouded U.S. production prospects, analysts said.

Soybeans also advanced on the weather worries and wheat closed higher after a choppy session.

Chicago Board of Trade July corn settled up 11 cents at $4.53 per bushel after reaching $4.57-1/4, a contract high and the highest for a most-active contract since June 2014.

CBOT July soybeans ended up 8-3/4 cents at $8.96-3/4 a bushel. July soft red winter wheat finished up three cents at $5.38-1/2 a bushel after touching $5.44, the contract’s highest since Dec. 19.

Corn set the tone, with the nearby July contract gaining sharply against back months on spreads, reflecting firm cash markets.

Until recently, big corn surpluses from a series of bumper U.S. harvests had traders selling nearby contracts and buying back months.

That trend has reversed, however, as unprecedented planting delays in the Corn Belt raised questions about the potential size of the 2019 crop.

End-users of corn, such as producers of livestock feed and ethanol, have been bidding up for old-crop supplies in the cash market this week, especially in the eastern Midwest, where farmers have been hit hard by unrelenting spring rains.

That demand has sent the nearby CBOT July contract surging against back months as traders unwind short July/long September futures.

“These eastern Corn Belt end-users, they are deathly afraid that they are not going to have any corn to draw on. That’s why the spread has just exploded,” said Tom Fritz, a partner at EFG Group in Chicago.

CBOT soybeans rose on outlooks for rain over the next 15 days, with the heaviest precipitation expected in Missouri, Illinois, Indiana and Ohio.

“The persistent wet weather in these areas will severely limit remaining soybean planting and increase the potential for significant declines in soybean acreage, in addition to the large declines in corn acreage that are now unavoidable,” space technology company Maxar said in a daily weather note.

CBOT wheat futures closed modestly higher but dipped lower at times during the session on profit-taking after the July contract reached its six-month peak.

K.C. July hard red winter wheat posted a larger gain, supported by expectations of a pick-up in the amount of wheat fed to cattle as a cost-effective alternative to corn.

Front-month CBOT corn on Friday closed at a discount of 23-1/4 cents a bushel to front-month K.C. wheat, the narrowest in three years.

“Every feedlot I have is looking at feeding wheat now,” said Dan Basse, president of AgResource Co. in Chicago. “At these kinds of spreads, people are really going to jump on feeding wheat.”

— Julie Ingwersen is a Reuters commodities correspondent in Chicago; additional reporting by Gus Trompiz in Paris and Naveen Thukral in Singapore.

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