U.S. corn futures matched their all-time high Monday as growing concerns federal forecasters will slash the outlook for supplies provided fresh fuel to a 10-month rally.
Corn for May delivery matched the June 2008 all-time high of $7.65 a bushel and set a new record settlement price of $7.60 1/4 a bushel at the Chicago Board of Trade. The previous highs were set in June 2008 during a broad-based surge in commodity prices that was quickly undercut by the global financial crisis.
Since last summer, corn futures have more than doubled on strong export demand, record U.S. ethanol output and steady buying by domestic livestock producers. Farmers have struggled to keep pace, even though the U.S. crop last year was the third largest on record.
"While the rate of corn use does not appear to be slowing, a slowdown is required," said Darrel Good, an agricultural economist at the University of Illinois.
The latest surge in futures is driven by worries the U.S. Department of Agriculture on Friday could make a significant cut in its forecast for end-of-season supplies after reporting lower-than-expected inventories last week. U.S. supplies already are projected to reach a 15-year low of 675 million bushels by the end of the marketing year on Aug. 31.
Friday's report could show the U.S. is on track to have end-of-season inventories equal to less than four days of demand by domestic users and foreign buyers, said Bryce Knorr, an analyst for Farm Futures, an agricultural publication.
He estimates the USDA could cut its projection for supplies to 525 million bushels to 575 million bushels. End-of-season inventories reached an all-time low of 426 million bushels in the 1995-96 crop year.
"The function of the market will be to ration demand for the balance of the year," said Charles Soule, an analyst for Country Hedging.
Wheat futures also finished sharply higher, with the market surging as hot, dry weather threatens output in the Plains. The USDA is expected to confirm Monday in its first weekly crop progress report of the year that hard red winter wheat is in poor shape. The crop, grown in the Plains and used to make bread, has struggled with dryness since it was sown last fall. It will be harvested this spring and summer.
Soybean futures, on the other hand, weakened as harvest advanced in South America. Export demand is seen to be shifting to Brazil and Argentina from the U.S., which will plant a new crop of soybeans this spring and harvest it next fall.