July 16, 2012 / 12:23 PM / 8 years ago

GRAINS-Corn price jumps near daily limit as crop withers

* New-crop corn price up 52 pct in a month
    * Corn, soy at contract highs as crops deteriorate
    * Forecasts for high heat and slight rain this week
    * Coming Up: USDA's weekly crop progress report

 (Updates prices to close, adds new quotes, crop conditions)
    By Michael Hirtzer
    CHICAGO, July 16 (Reuters) - U.S. corn futures rose on
Monday by as much as the daily 40-cent trading limit, then
settled within striking range of the record high of nearly $8
per bushel, as an unrelenting drought took further toll on the
    The U.S. Agriculture Department, in a weekly report after
the close of trading, cut its corn crop condition ratings by the
most in about a decade, pegging ratings for both the corn and
soybean crops as the worst since the historic drought year of
    And the crops could get worse. Weather models updated at
midday scaled back forecasts for rains in the eastern Midwest
while a high pressure ridge likely to block moisture in the
western part of the region where most of the U.S. corn and
soybean are grown.
    "The damage had already been done in 1988, whereas here in
2012 the situation is still evolving," said Bill Nelson, analyst
with Doane Advisory Services.
    The drought, the worst in 24 years, was taking a heavy toll
in the Midwest even in states like Nebraska, where a large
portion of the state's farmland are irrigated.
    The state ordered more than 1,100 of its farmers to halt
irrigating their crops because the rivers from which they draw
water are being depleted by the drought. 
    Corn for September delivery ended 36-1/4 cents higher
at $7.76-3/4 per bushel after rising the daily limit of 40
cents. The most-active December, the first contract to
reflect the fall harvest, gained 32-1/4 cents to $7.72-1/2.
    "The forecasts all shifted this morning. Basically, we have
the same (forecasts) for the next 10 days at least -- no
moisture," said Citigroup analyst Sterling Smith. "We are
beginning to see appreciable damage in the western Corn Belt and
that's just adding to the nervousness."
    Midday weather models reduced chances for rain in the
eastern Midwest while scorching weather is expected to continue
throughout the region. 
    New-crop November soybeans jumped 38 cents to
$15.90-1/2 per bushel after earlier hitting a contract high of
    USDA after the close rated the corn crop at 31 percentage
good to excellent and soybeans 34 percent good to excellent,
with ratings cuts of each crop steeper than analysts expected.
    Extreme dryness and heat this summer first hurt crops in the
eastern and southern Midwest, but now that weather is expanding
into western and northwestern states such as Iowa, Nebraska,
Minnesota and the Dakotas, all major producers of corn and
    "We need soaking rains now. We need 2 to 3 inches (about 5
to 8 cm), and that's not in the forecast. This does nothing for
the crops," said AgResource Co analyst Dan Basse.
    Wheat futures jumped in sympathy with surging corn and on
news that Russia may revise its grain export forecasts as
winterkill and spring drought reduced the size of the crop
their, which was expected to be the fourth largest exporter this
    CBOT September wheat ended 36-3/4 cents higher at
$8.84-1/2 a bushel, highest since February 2011 on a continuous
    "The Russian wheat number surprised some folks and that was
seen as supportive," Basse said. "We must be looking at whether
Russia will slow or stop exports."
 Prices at 4:41 p.m. CDT (2141 GMT)      
                              LAST      NET    PCT     YTD
                                        CHG    CHG     CHG
 CBOT corn                  776.75    36.25   4.9%   20.1%
 CBOT soy                  1633.75    39.00   2.5%   36.3%
 CBOT meal                  487.30    13.20   2.8%   57.5%
 CBOT soyoil                 54.65     0.95   1.8%    4.9%
 CBOT wheat                 884.50    36.75   4.3%   35.5%
 CBOT rice                 1564.00    35.50   2.3%    7.1%
 EU wheat                   264.75     6.00   2.3%   30.7%
 US crude                    88.20     1.33   1.5%  -10.8%
 Dow Jones                  12,727      -50  -0.4%    4.2%
 Gold                      1588.85    -1.18  -0.1%    1.6%
 Euro/dollar                1.2271  -0.0001   0.0%   -5.2%
 Dollar Index              83.1240  -0.2250  -0.3%    3.7%
 Baltic Freight               1102       -8  -0.7%  -36.6%
 (Additional reporting by Sam Nelson in Chicago; Editing by John
Picinich, Bob Burgdorfer, Sofina Mirza-Reid and David Gregorio)
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