Corn futures leap to a 7-year excessive on provide issues

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Farmer Roger Hadley in his John Deere combine harvests corn from his fields in this aerial photo taken over Woodburn, Indiana.

Bing Guan | Reuters

Corn futures continued their sharp rise on Monday, hitting their highest level in more than seven years and triggering a trading pause on the Chicago Board of Trade.

The futures contracts were trading at more than $ 6.50 a bushel early Monday, up more than $ 1 a bushel since late March. The rise in prices came as the inclement weather in the upper Midwest raised concerns about corn supplies amid a wider hike in commodity prices.

“As drought conditions continue to worsen in North and South Dakota, there is an additional risk to the 2021 planting season that could put pressure on supplies in an already tight market … The two states account for much of the country’s wheat production and ~ 7.5% of corn production and ~ 10% of soybeans, “Jefferies said in a statement to customers earlier this month.

Corn’s jump comes amid a broader rise in commodity prices, with wheat futures also hitting their highest since 2013 on Monday. The wood futures have also risen sharply in recent weeks.

“The price increase and the already high price level, especially for corn, also reflect the nervousness in view of the current market crisis, which is expected to repeat itself in 2021/22,” said Commerzbank in a message to customers last week.

The CME Group has price limits on various products, including stocks and commodity futures, to manage intraday volatility. If a product rises or falls to a preset level, as was the case with Corn Futures on Monday, the exchange may temporarily suspend trading.

Corn futures last rose about 3% on Monday.

Rising commodity prices should also arouse fears of possible inflation. General Mills’ chief financial officer said during the company’s earnings call in March that the food company intended to raise prices to offset higher input costs.

Federal Reserve and Biden government economists have said that a short-term spike in inflation is expected in the coming months, driven by several factors including low demand from Covid-19 last year and consumer spending fueled by federal incentives . However, the price hikes could prove temporary and inflation could normalize once the initial reopening jolt is over.

The sharp rise in prices does not necessarily mean that a shortage of corn is imminent. According to the US Department of Agriculture, the amount of corn planted as of April 18 was roughly the average for the past five years.

Agricultural companies like Archer-Daniels-Midland could benefit from rising prices for corn and other products. The company’s stock is up nearly 20% since late January, and Bank of America gave the stock a buy rating on Wednesday in which it “leads a renewed Ag cycle expected to last a few years and possibly much longer” .

Michael Bloom of CNBC contributed to this report.

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