European Corn Now Being Hit by Drought

While the focus on the hot temperatures and drought conditions in the U.S. have been garnering much of the news surrounding corn around the world, parts of southern Europe and stretching through into Ukraine are now starting to get hit by drought-like conditions as well, with temperatures rising to about 5 degrees Fahrenheit above normal, to 95 degrees Fahrenheit.

Accounting for approximately 16 percent of global exports, Europe is now adding to the concerns over how high the price of grains will go this year and how it will affect food prices.

Similar to corn in the U.S., the corn in the European region mentioned has now entered is pollination stage, which is the worst timing because it's that phase of the growth which determines the corn yield.

It is now clear that Europe will now have to import more corn and wheat than normal.

According to the USDA, EU corn yields are projected to drop about 12 percent over last year to about 6.73 tons a hectare, which is a little under two and a half acres.

Countries being hit the hardest in the EU are Italy, Hungary and Romania.

Since the middle of June, corn on the CBOT has soared by 57 percent to $7.9375 a bushel. Goldman Sachs (NYSE: GS) projects prices to climb as high as a record $9 a bushel within 3 months.

Wheat has been rising along with corn, with prices jumping to $9.4725 a bushel.

Soybeans, which are also in danger from under performance, has jumped to $16.4475 a bushel, a 36 percent increase. Along with corn, it has recently set all-time highs.

In early July the International Grains Council estimated the global corn crop to rise to 917 million tons this year, but the ongoing damage to crops around the world wasn't reflected in those numbers, which are sure to drop when the next report is released on July 26.

Corn Futures Climb on USDA Crop Forecast Cut

The price of corn continues to rise after the USDA unsurprisingly cut the projected corn yield of 166 bushels an acre for 2012 down to 146 bushels an acre.

All of this is related to the ongoing drought conditions plaguing the Midwest, where heat and dry weather has hammered the quality of the grain.

After the report the price of corn jumped 3.2 percent.

The report said this:

"Persistent and extreme June dryness across the central and eastern Corn Belt and extreme late June and early July heat from the central Plains to the Ohio River Valley have substantially lowered yield prospects across most of the major growing regions. Harvested area is also reduced slightly based on the June 29 Acreage report.

Reduced supplies and higher prices are expected to sharply lower 2012/13 corn usage with the biggest reduction for feed and residual disappearance, projected down 650 million bushels. Food, seed, and industrial use is also projected lower, down 105 million bushels, mostly reflecting a 100-million-bushel reduction in corn used to produce ethanol. Exports are projected 300 million bushels lower as tight supplies, higher prices, and strong competition from South American exporters limit U.S. shipments.

A 52-million-bushel increase in beginning stocks and a 15- million-bushel increase in imports offset only a small portion of the expected reduction in this year’s crop. Ending stocks for 2012/13 are projected at 1.2 billion bushels, down 698 million from last month’s projection. The season average 2012/13 farm price for corn is projected at $5.40 to $6.40 per bushel, up sharply from $4.20 to $5.00 per bushel in June. "

Soybeans and wheat continue to be pulled up by the price movement of corn, with soybeans rising just under 2 percent and wheat futures increasing by 2.36 percent.

Deere & Co. (DE) Projects Lower Corn Prices

Agriculture equipment maker Deere & Co. (NYSE:DE) said on Wednesday they see corn prices dropping for 2012-2013, along with the price of soybeans, cotton and wheat.

Using a date for the starting the year of September 1, Deere said they see corn prices falling on average to $5.30 a bushel for 2012-2013, down from the average of $6.40 a bushel in 2011.

Soybeans are expected to drop significantly by Deere, with estimates of price per bushel falling from $13 a bushel in 2011 to $10.50 a bushel for 2012-2013. That's down from the November estimate of $11.25 a bushel.

For wheat, Deere sees prices dropping from $7.40 a bushel in 2011 to an average of $6.70 a bushel for 2012-2013. That's a little up from the November estimates of $6.60 a bushel for wheat.

Cotton is forecast to plummet from 88 cents a pound in 2011 to 75 cents a pound on average for 2012-2013.