(Bloomberg) — Dry weather baking key agricultural areas from America’s bread basket to the grain-growing regions of Brazil is fueling a renewed surge in crop prices from corn to canola.
A sweltering heat in the Canadian Prairies that’s stretching into the U.S. Northern Plains and parts of the Midwest is raising fresh concerns for crops when global supplies are already tightly balanced. The heat has sent corn futures to the highest level since mid-May, extended canola oil’s rally to a record high and lifted soybean prices the most in more than three weeks.
Last week’s heat further depleted already short soil moisture in some North American growing regions, and that was worsened by equally high temperatures over the weekend, said Tobin Gorey, agricultural strategist with Commonwealth Bank of Australia (OTC:). Dryness is also hampering some Russian grain-growing areas and a worsening drought has shriveled Brazil’s corn crop.
“The market will remain hypersensitive to these weather issues because feed grain supply is tight,” Gorey said Monday in a note.
futures are up more than 9% this month for the most-active contract, hitting a record high of C$784.40 per metric ton on Monday before paring some gains. Spring wheat, which shares a similar growing region, slipped 0.5% after ending last week at its highest point since 2017. Soybeans gained as much as 3.1% to $14.80 per bushel in its biggest jump since May 12, while corn rose by as much as 3.4% before retreating to post a 0.7% gain at $6.875 a bushel as of 10:41 a.m. in Chicago.
CROP SURVEY: Analysts See Lower Corn Supplies Before WASDE
Good conditions are needed throughout the Northern Hemisphere’s growing season to replenish global stockpiles depleted by record Chinese demand and earlier weather woes. The heightened crop concerns come ahead of a monthly report from the U.S. Department of Agriculture on Thursday, which analysts expect will show a further draw-down in world wheat and corn stockpiles.
High temperatures in the north-central U.S. at the start of this week will “continue to be more reminiscent of the middle of summer instead of early June,” a government forecast shows. The USDA will issue weekly crop condition scores later on Monday.
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