SYDNEY: Chicago corn surged to a contract high on Tuesday, extending a drought-fed rally of more than 40 percent over the last four weeks, as searing heat in the US grain belt dealt yet another a heavy blow to crop yields last week.
Soybeans jumped to a contract top as well after a weekly report from the US Department of Agriculture showed that the drought, the worst since 1956, also pummelled the soybean crop. September wheat rose, tracking gains in corn and gaining for a tenth session out of twelve.
"It is all weather related," said Victor Thianpiriya, an agricultural strategist at ANZ.
"There was some scattered rain over the Midwest over the weekend, but nowhere near enough to make a difference, and the outlook is very dry, with temperatures very high at least for the next few days."
Chicago Board of Trade new-crop December corn, the most actively traded contract, rose 1.4 percent to $7.83-1/4 a bushel by 0342 GMT, having hit a contract high of $7.89 earlier.
November soybeans rose 0.6 percent to $15.99-1/2 bushel after hitting a contract high of $16.07 earlier in the session. September wheat rose 1.2 percent to $8.94-3/4 a bushel, just below the session high of $8.97-3/4 a bushel.
Grains and oilseed prices are set to see a further surge as meteorologists expect the drought afflicting the US Midwest to worsen. There were signs that the drought, which has been centered in the Midwest, was expanding north and west, putting more crops at risk.
The corn crop in the world's top exporter of the grain has wilted under the relentless heat, with the USDA's rating for the crop falling more than expected to 31 percent good to excellent - down 9 percentage points from the prior week.
The USDA cut its corn yield estimate by an unprecedented 20 bushels in a report last week to 146 bushels per acre, igniting concerns that this year's crop could mirror production in 1988 when a similar drought decimated the crops.
The drought also hit the soybean crop, which was rated 34 percent good-to-excellent, down 6 percentage points from the previous week and one point below estimates for 35 percent.
"There is no end to the current drought in sight, and market participants are expecting crop conditions are likely to deteriorate further," Michael Creed, agribusiness economist at National Australia Bank said.
US wheat production remains relatively unscathed by the drought. US winter wheat is 80 percent harvested, the USDA said, well ahead of the five-year average of 65 percent and up from 75 percent a week ago.
USDA rated spring wheat at 65 percent good-to-excellent for the week that ended on July 15, down 1 percentage point from the previous week.
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