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Corn, Wheat Spike After U.S. Cuts Forecasts on Midwest Flooding

Patrick McKiernan and Lydia Mulvany
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Corn, Wheat Spike After U.S. Cuts Forecasts on Midwest Flooding

(Bloomberg) -- Corn’s waning rally snapped back to life after the U.S. government predicted a deluge in the country’s grain belt will harm supply more than analysts expected.

In a report Tuesday, the U.S. Department of Agriculture said domestic corn yields would be the lowest since 2013 as relentless rain keeps planting progress at the slowest pace on record. This season’s output will be 13.68 billion bushels, the USDA said. Analysts expected 14.04 billion on average.

The “aggressive” 9% reduction from the USDA’s previous projection “probably fulfilled a lot of bullish hopes,” said Rich Nelson, chief strategist at Allendale Inc. in McHenry, Illinois.

Corn futures for July delivery rose as much as 3.5% to $4.3025 a bushel, the contract’s biggest intraday gain this month. The price fell as much as 1.8% before the World Agricultural Supply and Demand Estimates report was released. Options volume also jumped.

In May, the grain surged 18%, a record for the contract that debuted in January 2016. Through Monday, the commodity slid 5.1% from the May peak, partly on U.S.-Mexico tariff turmoil.

Wheat futures for July delivery rose as much as 2.2% to the highest in a week. Earlier, prices fell as much as 1.4%.

The contiguous U.S. had its wettest January to May on records going back to 1895, according to the U.S. National Centers for Environmental Information in Asheville, North Carolina.

--With assistance from Brian K. Sullivan, Shruti Date Singh, Mario Parker, Michael Hirtzer, Isis Almeida and Dominic Carey.

To contact the reporters on this story: Patrick McKiernan in New York at pmckiernan@bloomberg.net;Lydia Mulvany in Chicago at lmulvany2@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Pratish Narayanan

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