Corn, Soybeans Jump on Pro Farmers' Bullish U.S. Crop Forecasts

By Jae Hur

Aug. 25 (Bloomberg) -- Corn and soybeans gained after Professional Farmers of America said harvests in the U.S. will be smaller than forecast by the government as dry weather in August hurt Midwest crops already stunted by flooding in June.

This year's corn harvest will total 12.152 billion bushels, down 1.1 percent from the U.S. Department of Agriculture's estimate of 12.288 billion earlier this month, Pro Farmer said Aug. 22 in an e-mailed statement. Soybean production will be 2.93 billion bushels, 1.4 percent less than the government estimate of 2.973 billion, the group said.

``The gains in corn and soybean prices today are a reaction to Pro Farmers' bullish U.S. yield forecasts for both of these crops,'' Toby Hassall, an analyst with Commodity Warrants Australia, said in an e-mailed note today.

Corn for December delivery added as much as 22.25 cents, or 3.7 percent, to $6.2875 a bushel, the highest since July 18, in after-hours electronic trading on the Chicago Board of Trade and traded at $6.2075 as of 3:39 p.m. in Singapore.

The price gained 10 percent last week, the second straight weekly gain, partly on speculation that a lack of rain will curb potential yields. The contract has soared 76 percent in the past year, reaching a record $7.9925 on June 27.

Soybeans for November delivery gained as much as 47.5 cents, or 3.6 percent, to $13.745 a bushel, the highest since Aug. 1, and last traded at $13.6275. Futures, which gained 8.9 percent last week, have surged 59 percent in the past 12 months, reaching a record $16.3675 on July 3.

Argentine Drought

A prolonged drought in Argentina, the world's second-largest corn exporter and third-largest for soybeans, has eroded field conditions as farmers prepare to sow new crops, the Buenos Aires Cereals Exchange said.

The northern and western areas of the Pampas agricultural zone are experiencing a ``severe drought,'' with scant rainfall and rising temperatures as spring planting starts in the Southern Hemisphere, the exchange said Aug. 22. Argentine farmers begin planting crops such as soybeans and corn next month.

``The prospect of a significant year-on-year reduction in Argentina's planted corn and soybean acres is also adding to the bullish stimulus,'' Hassall said. ``At present we believe risks to corn and soybeans prices are skewed to the upside.''

Crude oil for October delivery rose as much as 0.8 percent to $115.50 a barrel after losing 5.4 percent on Aug. 22, the biggest drop since Dec. 27, 2004. The October contract had jumped 4.9 percent the previous day. The dollar rose for a second day against the euro.

Oil Volatility

``After the volatility we saw late last week in the crude market it is likely that early-week sentiment in the oil market may spill-over into commodities generally,'' Hassall said.

The market was also supported by less-than-expected rainfall in the Midwest over the weekend and concern cooler temperature in some part of the Midwest may damage soybean crops, said Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co. ``A strengthening dollar may limit the gains in grains,'' he said.

Wheat for December delivery rose as much as 19.5 cents, 2.2 percent, to $9.10 a bushel and stood at $9.02 as of 3:39 p.m. Singapore time. The contract, which 4.9 percent this week last week, has gained 25 percent in the past year, touching a record $13.495 on Feb. 27.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net