(Wall Street Journal) – Corn prices got a respite from a recent slide as investors bet that the favorable weather that has led to the best crop conditions in four years won’t last.
Corn for July delivery rose three cents, or 0.7%, to $4.47 a bushel on the Chicago Board of Trade on Friday, two days after rolling to an almost four-month low.
Ample rain during the planting season has the Agriculture Department forecasting the yield for the 2014-15 crop at 165.3 bushels an acre and production at 13.935 billion bushels, both records. Recently, three-fourths of the U.S. crop was in good or excellent condition, the best rating for this time of year since 2010. That has driven corn prices down 14% from the peak of $5.215 a bushel in late April.
But traders say the outlook could change with the weather.
“Statistically, these early ratings aren’t the most accurate indicator of where the final crop is going to end up, so there’s a hesitancy to push down prices too much,” said Jason Britt, the president of brokerage Central States Commodities in Kansas City, Mo., who also works on his family farm in northern Missouri.
A weather system moving into the U.S. may bring hot, dry weather to the southern Plains and the Ohio River Valley, Joel Burgio, a meteorologist at agriculture-data provider DTN, said in a note to clients on Friday. But that dry weather may not affect Iowa and Illinois, the biggest corn-growing states.
Traders may have good reason to be skeptical. The weather was ideal in May and June of 2012 before one of the worst droughts in U.S. history took hold in July and devastated the corn crop, cutting yields to the lowest level in 19 years.
Too much rain can also be a problem. If excessive precipitation hits some parts of the Corn Belt, it could flood fields and cause crop losses, said Gail Martell, an independent weather forecaster in Whitefish Bay, Wis.
History isn’t on the side of the government forecast. In 2010, favorable weather led the government to predict a yield of 163.5 bushels an acre in June. Though conditions that summer remained mostly normal, farmers collected only 152.8 bushels an acre, according to the USDA. The weather this year would have to be nearly perfect to achieve the record yield forecast by the government, said Ted Seifried, the chief market strategist at brokerage Zaner Ag Hedge in Chicago.
