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Poor US crops, hike in jobs lift US corn, soybeans

An upbeat US jobs report coupled with private forecasts that the drought has hurt U.S. crops more than government surveys indicate fueled strong grains in Chicago Board of Trade corn and soybean futures on Friday.

U.S. employers hired the most workers in five months in July, the Labor Department said on Friday, news that lifted commodity and equity markets.

In addition, private crop forecasters Informa Economics, Doane Advisory Services and Farm Futures magazine each warned on Friday that the historic drought will leave U.S. corn and soy production well below the U.S. Department of Agriculture’s latest estimates.

Those crop projections came a week before USDA is expected to reduce its outlook for the crops in a monthly report. The projections gave the markets “renewed vigor” after retreating from record highs reached last month.

Farmers throughout the Midwest continue to assess the severe damage inflicted on their fields by weeks of sizzling temperatures and little rain, which dashed early hopes for a bumper crop.

“We’re groping around trying to figure out what the real yield is,” said Alan Brugler, president of Brugler Marketing & Management.

Spillover support from strong gains in crude oil and equities supported Friday’s futures rally, with a weak dollar helping feed the bull market sentiment.

The dollar fell to a one-month low against the euro, making dollar-denominated commodities cheaper for foreign buyers, after the release of better-than-expected U.S. employment data for July.

Chicago Board of Trade new-crop December corn rose 14-3/4 cents, or 1.9 percent, to $8.10-1/2 per bushel, while actively traded November soy gained 11-1/2 cents, or 0.7 percent, to $16.28.

FALLING FORECASTS

Analytics firm Informa Economics on Friday predicted USDA’s Aug. 10 crop report will estimate the U.S. corn crop at 10.338 billion bushels, according to traders. That was down 10 percent from Informa’s previous forecast and 20 percent below the USDA’s latest estimate of 12.97 billion bushels.

Informa projected final U.S. 2012 corn production at 11.224 billion bushels, traders said. Informa does not publicly release its estimates.

Doane Advisory Services forecast corn production at 10.792 billion bushels following an annual crop tour, while a Farm Futures Magazine survey put the corn crop even lower at 9.57 billion bushels.

The markets were “showing some renewed vigor on supportive private-sector forecasts,” said Rich Feltes, senior vice president of research for R.J. O’Brien.

The USDA said last week that U.S. food prices could rise as much as 3.5 percent this year and up to 4 percent in 2013 due to the drought, as soaring corn and soybean prices drive up meat, dairy and poultry prices.

On Monday, U.S. livestock groups appealed to the Environmental Protection Agency (EPA) to curb or suspend a mandate to use corn to make ethanol, warning against the ruinous impact of soaring feed costs. Corn and soybean meal make up basic animal feedstuffs, and about a third of the corn crop is used to make ethanol.

The drought-hit U.S. Midwest has received some rain, but for the corn weather forecasts are becoming less important because it is too late for showers to help the crop.

Instead, traders are watching carefully to see how much buyers curb purchases of farm products because of high prices.

“That’s the big issue: whether we’re going to see demand shrink or not,” said Dax Wedemeyer, broker for U.S. Commodities.

RUSSIAN DROUGHT WORRIES WHEAT

Concerns about poor whether are global, as wheat price received an additional boost on Friday on speculation that dry weather in Russia could lead to export restrictions by the Black Sea producer.

Russia, a major wheat exporter, shocked traders in 2010 by banning grain exports due to a severe drought.

Russian grain exports are off to a fast start in the new agricultural year even though Russia’s exportable surplus has shrunk drastically in the drought, surprising analysts and raising questions about how long Russia can sustain the pace.

Investment bank Goldman Sachs said it saw growing upside risks to wheat prices in the coming months due to continued dry weather in countries such as Argentina, India, Australia and the former Soviet Union.