(DesMoines Register) – Both corn and soybean prices posted records for any contract at the close on the Chicago Board of Trade, with the August corn contract up 6 cents per bushel to $8.01 and soybeans up 48 cents per bushel to $17.31.
The near-month highs reflect growing worries that supplies of both grains, used for livestock feeds, biofuel production and for oils and sugars, will run short before the next harvest begins to come in beginning late September.
The new crop December contract for corn fell by 6 cents per bushel Thursday to $7.78 after the U.S. Department of Agriculture’s weekly export summaries showed a plunge in export sales of more than 80 percent for the week ending July 12 from the previous week.
Analysts had speculated that high corn prices could eventually run into price resistance, first from export customers and then from ethanol plants and livestock feeders.
Soybeans, faced with the tightest U.S. domestic stocks in 15 years, saw strong exports and their new crop November contract closed up 38 cents per bushel Thursday to $16.58. That price also is a record.
Iowa is the nation’s number one producer of both corn and soybeans. Together the two crops generated $20 billion in cash to Iowa’s economy in 2011.
Meanwhile the updated U.S. Drought Monitor map shows the entire eastern half of Iowa now designated as “severe drought.”
Through last week the severe drought category had been confined mostly to the central third of the state from the Missouri to Minnesota borders.
The high corn and soybean prices are in response to the intense heat and drought over the Midwest, which is the most severe since 1988 and has prompted private estimates of this year’s corn crop to be lowered to less than 140 bushels per acre.
The market got a fresh push Wednesday when U.S. Secretary of Agriculture Tom Vilsack said he did not think that it would be necessary to lower the federal Renewable Fuel Standard, which mandates at least ten percent of gasoline use come from ethanol.
Vilsack made his comments after a meeting with President Obama. Rumors that the RFS might be cut in an effort to bring down the price of corn, and ultimately tame what are expected to be rising food prices, had been about the only brake on what has been a 50 percent rise in corn prices since early June.
On Thursday a coalition of livestock groups introduced a study that it said demonstrates that the Renewable Fuel Standard has “destabilized” grain prices to the detriment of cattle, pork and poultry producers.
The group, which includes the National Cattlemen’s Beef Association, the National Chicken Council, the National Pork Producers Council and the National Turkey Federation. urged a relaxation of the RFS, saying “”such relief is extremely urgent, the coalition points out, because the recent spike in corn prices prompted by drought conditions in much of the Corn Belt has analysts predicting the United States will run short of corn this summer.”
The group’s statement said “another short corn crop would be extremely devastating to the animal agriculture industry, food makers and foodservice providers.”
Ethanol interests fought back.
Executive vice president Brian Jennings of the American Council for Ethanol said “while the groups paying for this study feel entitled to cheap corn forever and are shamelessly exploiting the drought as an excuse to roll back the RFS, there is no credible evidence to justify reducing or waiving it.”
“The fact is the RFS is helping reduce dependence on foreign oil, moderating gas prices, and securing jobs in rural America. Both USDA Secretary Vilsack and U.S. Senator Stabenow, chair of the Senate Agriculture Committee have indicated the drought is not an excuse to waive or repeal the RFS.”
The group noted pointedly that “because of the RFS, however, corn-based ethanol manufacturers are protected from sharing the full burden of a corn harvest shortfall.”
While the agricultural interest groups jawed with one another, farmers in Iowa and the rest of the Midwest nervously eyed the skies of any signs of rain.
Parts of northern and eastern Iowa received light showers, amounting to between one-tenth and one-quarter of an inch of precipitation, far below what agronomists say is needed to replenish soils that have been substandard for moisture since last fall.
But aside from scattered showers that might appear in eastern Iowa by weekend, little rain is in the National Weather Service 7-day forecast for Iowa. Meanwhile temperatures are expected to remain in the upper 90s.
The U.S. Department of Agriculture last year cut its forecast for the corn crop from the original 166 bushels per acre in May to 146 bushels per acre.
Corn is going through its crucial pollination stage now in temperatures at least ten degrees hotter than advisable and soils depleted of moisture after ten consecutive weeks of below-average moisture in Iowa, Illinois, Indiana and Missouri.
Soybeans, whose domestic stocks are at a record low, will go through a similar important period early in August when their pods are set and begin to fill.
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