(ATF) Corn (maize) futures hit their highest price in more than eight years on Monday due to limited US supplies, strong China demand and concerns over drought in Brazil.
The most-active July corn contract posted the biggest gains. Traders continue to focus on tight global corn supplies as many American farmers are working to plant crops for the autumn harvest, rather than selling crops held in storage bins.
The farmers are planting at the fastest pace since 2015, a move that could finally bring some relief to a market that’s battling tight supplies.
Sowing is 46% complete, the US Department of Agriculture (USDA) said on Monday, a rise of 29 percentage points over the previous week, the biggest such advance in six years.
US supplies might be the only the factor that can help prices ease from the highest recorded prices since March 2013. Growers in top rival Brazil are battling drought, while China is snapping up huge purchases.
"These supply concerns are coming at a time when demand remains strong," Warren Patterson, head of commodities strategy at ING, said.
Last month, the USDA estimated China would buy a record 28 million tonnes of grain from global markets.
FIGHT FOR CROP
A need to replenish pig herds after an outbreak of deadly African swine fever will fuel China’s appetite. High corn prices increase costs to feed livestock herds, which translates to meat inflation for consumers.
The USDA data showed that US corn export inspections increased to 1.95 million tonnes over the last week compared to 1.56 million tonnes in the previous week and 1.08 million tonnes during the same period last year. Year-to-date export inspections for corn have increased 83.9% year-on-year to 41.2 million tonnes.
"The tight supply situation is certainly not going to be any better by July as ethanol producers, livestock feeders and exporters fight to obtain cash corn," Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage in Iowa, told Reuters.
The Chicago Board of Trade's most-active corn futures were up 10-3/4 cents at $6.84 a bushel after earlier setting an eight-year high of $6.98.
The corn futures are the latest commodities to soar in recent weeks. "Grain and soft commodities remain on fire as the immediate supply outlook continues to tighten," Ole Hansen, head of commodity strategy at Saxo Bank, said.
"All three major crops of corn, wheat and soybeans have reached eight-year highs while coffee and sugar have both rallied strongly," he added.
However, some crops have eased since. Soybeans fell 13-3/4 cents to to $15.20-1/2 a bushel in Chicago on Monday after touching 8-1/2-year highs last week. Wheat dipped 11-3/4 cents to $7.23 a bushel.
With reporting by Reuters