Corn, wheat and soyabean prices have rallied by up to 35 per cent from their early summer lows as heavy rain in the US Midwest delay the harvest, triggering concerns about a drop in supplies.
“This may be the slowest harvest on record,” said Greg Wagner, an agricultural commodities analyst at AgResource consultancy in Chicago.
Analysts and traders say, however, that the hold-up is likely to produce only a dent on a still bumper crop, with prices unlikely to rally much further unless it continues to rain in the next two weeks. Lewis Hagedorn, an agricultural commodities analyst at JPMorgan in New York, says that the delays harvesting corn and soyabean will “shave yield potential”, but adds: “We are still likely to see reasonably high yields in some areas.”
“The market was far too complacent about the harvest risks earlier this fall, but had recently swung to being too concerned,” Mr Hagedorn says.
Before the harvest delays, the US Department of Agriculture was forecasting the second largest crop on record for corn and the largest ever for soyabean.
Policymarkers are paying close attention nonetheless, as the rise in food commodities comes at the same time that oil prices hover at a year-high of $80 a barrel, prompting concerns about rising inflationary tensions.
Because the US exports half the world’s corn, a third of the world’s soyabeans, and a fifth of the world’s wheat, changes in output have a huge impact on global prices.
Corn prices in Chicago for immediate delivery last week hit a peak of $4.13½ a bushel, up 35 per cent from July’s low point. It traded at $3.8 a bushel on Thursday. Meanwhile, soyabean prices in Chicago have risen 16 per cent to trade last week above $10 a bushel, although on Thursday it was at $9.80 a bushel.
Wheat prices have also risen because the delays in harvesting the soyabean crop means that some farmers on a soya-wheat rotation are already late for sowing their winter wheat. Wheat in Chicago rose last week to $5.74¾ a bushel, up 30 per cent from late August. On Thursday, wheat traded at $5.1 a bushel.
The heavy rains of October have left muddy fields, impeding farmers in the use of their combines. In the few areas where the harvest is under way, corn and soyabean are extremely wet, so farmers have been forced to pay for drying their crops.
The US soyabean harvest was 44 per cent complete last week, well below the five-year average for late October of 80 per cent, according to the US Department of Agriculture. The corn harvest was similarly delayed, with only 20 per cent of the fields harvested, compared with the five-year average of 58 per cent, the USDA said.
The pace of the overall harvest is the slowest since 1979 and some analysts believe that it could hit a record delay as farmers are still waiting this week for dry weather.
Meteorologists are warning of further rains in the next two days but their forecast is for a relatively dry spell next week. Nonetheless, they warn that farmers still require 10 consecutive days of dry weather to finish harvesting this season’s crops.
Even if the weather improves, analysts believe there will be delays as drying facilities, already working at maximum capacity, will create bottlenecks. Usually, dry weather naturally removes moisture from the crops, but farmers will be forced to reduce the damp artificially as they cannot wait any longer due to the arrival of the winter.