March 5, 2021

Poor Weather Pushes Prices Up for Corn and Soybeans

Prices for corn and soybeans jumped in commodities markets on Thursday after the Department of Agriculture said that the onslaught of bad weather, from heat and drought in some areas to heavy rains and flooding in others, would reduce yields for those critical crops.

Commodities experts said that would ultimately lead to higher prices to consumers for staples like vegetable oil, pasta and meat.

“The message, based on today’s report, is these higher costs should not be expected to abate any time soon,” said Bill G. Lapp, president of Advanced Economic Solutions, a commodity consulting firm that works with restaurant companies and food manufacturers. “It implies higher cost forthcoming and subsequent margin pressure, and at some point the need to increase prices at the retail level or on the menus.”

The report, based on a survey of farmers and visits to fields, predicted a national average corn yield of 153 bushels an acre, down from nearly 159 bushels in the government’s previous forecast. It also predicted a small drop in the number of acres of corn that would be harvested this fall.

Very hot temperatures and below average rainfall will lower yields, the report said. The dry, hot weather increases stress on the corn plant and keeps it from channeling an optimal amount of energy into the formation of kernels, according to Joel C. Widenor, a meteorologist with Commodity Weather Group, an agricultural consulting firm.

Mr. Widenor said July was the hottest in Corn Belt states since 1955. It was the fourth-hottest July in the prime corn-growing region in the last 117 years, he said.

Because the acreage planted this year was very high, the total corn crop will still be near record levels. But since high demand for corn for animal feed and ethanol production has tapped out stockpiles, the drop in expected yield means that prices will remain high. And high corn prices help push up the price for other grains, like wheat.

The Department of Agriculture’s report also lowered the forecast for soybean yield and the total soybean harvest.

“The extreme blowtorch of heat this summer took our yield down,” said Don Roose, president of U.S. Commodities, an Iowa commodities broker and consulting firm. “The wet weather we had early took our harvested acres down. Between the two of them we’re in a situation where now we have to ration supplies.”

December corn futures on the Chicago Board of Trade opened by jumping 30 cents, the maximum daily increase allowed, to $7.18 a bushel. Trading ended the day at $7.14. Soybean futures for the November contract opened at $13.53 a bushel, an increase of $0.52. The contract closed at $13.32.

“The markets over the past couple of weeks have been trying to figure out which is dropping faster, supply or demand,” said Chad E. Hart, an assistant professor of economics at Iowa State University. He said the U.S.D.A. report, called the World Agricultural Supply and Demand Estimates and known as Wasde, provided an answer. “What the Wasde report said is, supply,” he said.

Prices for agricultural commodities had fallen in recent days, as financial turmoil and political uncertainty roiled the stock market. But even so, prices for most commodities remain at historically high levels.

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