PARIS/SINGAPORE (Reuters) - Chicago corn jumped 8.5 percent on Monday to its highest price in more than two years, extending gains after the U.S. forecast on Friday supplies in the world’s top exporter would shrink to a 14-year low.
Chicago Board of Trade December corn futures surged as much as 45 cents to a high of $5.73-1/4 a bushel, the highest since September 24, 2008, and trading limit-up for the second straight day.
By 11:40 a.m. BST, it was at $5.72-1/4 a bushel, up 44 cents or 8.3 percent.
“Any period of time where you get two consecutive limit-up days, it’s likely to spur a little bit of panic buying as some people try to get in before they perceive it being a little too late,” said Luke Matthews, a commodity strategist at Commonwealth Bank of Australia.
Citing a late summer heat that reduced yields across the country’s corn belt, the U.S. Department of Agriculture on Friday cut its crop estimate by 4 percent, saying stockpiles would fall to less than a four-week supply by next autumn.
The USDA pegged the 2010/11 corn crop at 12.664 billion bushels, based on the average projected yield of 155.8 bushels per acre — well below the average analyst estimate of 12.960 billion bushels in production and 160.0 bushels per acre in yield.
With high demand, the corn surplus will shrink to 902 million bushels by the end of this marketing year, the smallest since 883 million in 1996/97.
“It’s not surprising the market reacted the way it has,” said Paul Deane, an agricultural commodity strategist at ANZ.
“People were of the expectation the USDA would cut (its yield estimate by) 2 or 3 bushels, but nothing as dramatic as they did, cutting to 156 bushels.”
Corn could breach $6 a bushel “reasonably comfortably,” given the market’s shock over the magnitude of the cut, said Deane, a level not seen since August 2008.
Soybean futures also raced higher after the USDA cut its crop forecast by 2 percent. CBOT November soybeans rose 4.25 percent to $11.83-1/2 a bushel, after rising as high as $11.85-1/4 earlier, their loftiest since August 13, 2009.
Hot weather in August prevented corn and soybeans from reaching peak yields, traders said. Mid-September rains slowed the harvest in the Upper Midwest.
CBOT December wheat rose 1.5 percent to $7.29-1/2 a bushel, off a three-week high of $7.39-3/4 earlier.
Corn has risen 77 percent since its June low of $324-1/2 a bushel, but it is still around 25 percent shy of the 2008 peak of $7.65 a bushel. Wheat is up 71 percent from the June low and 45 percent lower than the 2008 high.
European grains futures were also higher, mainly fuelled by the surge on U.S. markets and the bullish USDA data, traders said.
“We are still digesting the USDA report,” one said.
By 11:45 a.m. BST, Paris-based milling wheat front-month November was 4.25 euros or 1.9 percent higher at 228 euros a tonne.
European traders put the next resistance at 238 euros.