Escalating concerns over scorching heat and dry weather conditions in key grain-growing regions in the U.S. have been fuelling a furious rally in grain prices in recent weeks.
Corn has surged nearly 50% since June 1, wheat prices soared approximately 48%, while soy rose 26% in the period.
The National Weather Service issued heat advisories across the northern Plains and Upper Midwest for this week, as forecasts called for temperatures as much as 20 degrees above normal.
The National Oceanic and Atmospheric Administration deemed the current drought as the worst since 1956, while the National Climatic Data Center said that last month was the 14th-warmest ever and the 10th-driest June based on records going back to 1895.
On the Chicago Mercantile Exchange, corn futures for September delivery traded at USD8.0975 a bushel, rallying 1.85%. Prices touched an all-time high of USD8.1138 a bushel earlier in the day.
Corn prices have surged over the past four weeks amid concerns dry soil in the U.S. corn-belt could strain the development of crops in the region.
Weekly crop progress report from the U.S. Department of Agriculture released earlier in the week showed that the dry weather conditions across the U.S. Midwest and Great Plains-region caused significant damage to crops.
U.S. corn crop ratings declined to the lowest levels for this time of year since 1988 last week.
The USDA said that 31% of the U.S. corn crop was rated in ‘good’ to excellent’ condition as of July 15, well below the 66% recorded in the same week a year earlier.
The USDA already slashed its forecast for this year's corn yield by 12% to 146 bushels an acre from a previous estimate of 166 bushels.
The next few weeks will be important for the grain, as the crop could face bigger losses if more rain doesn't come during its pollination phase.
The U.S. produced 38% of the world's corn last year, making it the both world's largest corn producing nation and the largest exporter of the grain.
Elsewhere, soybeans futures for August delivery traded at USD17.1125 a bushel, jumping 1.6%. Prices hit a record-high of USD17.1488 a bushel earlier in the session.
Soy futures have gained sharply in recent weeks, as the same hot, dry weather that boosted corn was seen benefitting soy futures as well. Soybeans are grown in many of the same regions across the U.S. as corn.
Only 34% of the U.S. soybean crop was rated ‘good’ to ‘excellent’ last week, compared to 64% in the same week a year earlier.
Last week, the USDA cut its yield forecast for the soybean crop to 40.5 bushels per acre from 43.9 bushels per acre.
U.S. soybean production was now expected to total 3.05 billion bushels in the current marketing year, nearly 5% lower than the 3.205 billion bushels the USDA predicted in June.
The oilseed will begin flowering in late July to early August, a crucial development stage when stressful weather can severely damage yields.
Global soybean supplies are already on the decline, as severe drought conditions earlier in the year in major South American growers Brazil and Argentina damaged crops in the region.
Meanwhile, wheat for September delivery traded at USD9.1862 a bushel, climbing 1.7%. Prices rose by as much as 1.9% earlier in the day to trade at USD9.2075 a bushel, the highest since August 21, 2008.
Wheat futures have rallied sharply in recent weeks, tracking strong gains in corn and amid concerns over a disruption to supplies from the Black-Sea region.
Last week, the USDA reduced its projection of the wheat crop in Russia by 4 million tons due to poor yields.
Russia is a major wheat exporter and competes with the U.S. for business on the global market. A downbeat Russian crop outlook could boost demand for U.S. supplies, which is the world’s third largest wheat producer and biggest exporter.
The agency also cut its forecast for U.S. wheat inventories at the end of the 2012-13 marketing year to 664 million bushels, below expectation of 725 million.
The USDA estimated total U.S. wheat production this year at 2.22 billion bushels, slightly below expectations for 2.25 billion.
Corn is the biggest U.S. crop, valued at USD66.7 billion in 2010, followed by soybeans at USD38.9 billion, government figures show. Wheat was fourth at USD13 billion, behind hay.