Only 27 percent of US corn planted, slowest pace since ‘95, as rains raineth; corn prices surge to $6.0625 as shortage concerns grow, oil escalates to $122 per barrel

The July contract for corn reached $6.0625 per bushel as oil prices rose to $122 per barrel, and fears rose over production when it was revealed that only 27 percent of the US corn crop is planted, due to unrelenting rains in the Midwest. The planting pace is the slowest since 1995, according to the US Department of Agriculture. In interday trading, corn surged as high as $6.22 per bushel.

The Zaner Group estimates that the US corn crop must expand from 86 million acres in 2008 to 89 million acres to alleviate the potential for shortages. “The usage numbers and a trend line yield of 154 bushels could leave us with a carryout of 650 million bushels next year, which does not allow for any problems or errors this coming summer…I think we can afford to lose a few bean acres partly because we have two huge crops a year via South America and the United States. But we really can’t get corn down tighter than this.”

The U.S. Department of Agriculture (USDA) released 2008 report on crop plantings, projecting that US corn acreage would drop 8 percent to 86.0 million acres. Soybean production is expected to rise 18 percent to 74.8 million acres. Wheat production will rise 6 percent to 63.6 million acres.

“This news is inherently bullish for corn, as it indicates that last year’s record corn crop will almost certainly not be repeatable this year,” said Pavel Molchanov, analyst for Raymond James, in a note to shareholders. “Following today’s report, corn futures for the next two years rose an average of 2-3%, with several 2009 contracts now above $6.00/bushel. For context, we are currently projecting an average price of $4.95 in 2008 and $5.15 in 2009,” Molchanov said.

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