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Grain prices hit record, to keep soaring

CHICAGO/NEW YORK -- Grain prices set record highs on Friday and weather forecasts showed little to no relief in sight from the worst U.S. drought in more than half a century, feeding worries about food inflation at home and abroad as supplies dwindle in the world's largest grain exporter.

The United Nations' Food and Agriculture Organization (FAO) said it was concerned about the spike in grain prices, but it did not yet see the current situation as a repeat of the 2007-2008 food crisis when high prices sparked riots in many poor countries.

“We are concerned for two reasons: first the pace at which price rises are taking place and second because, at least for the time being, there seems to be no relief in prices, in particular for corn, soybeans and wheat,” said Abdolreza Abbassian, a senior economist and grain expert at the FAO.

Abbassian noted, however, that rice is abundant and wheat stockpiles are better than in 2008.

“We do not see any production or supply problems with rice. That is very important for food security of millions of people around the world,” he said, while cautioning that the U.S. drought would tighten world grain supplies in the coming months.

At the Chicago Board of Trade, soybeans for August delivery set a new record high of US$17.77-3/4 a bushel. Corn for September corn jumped to a record US$8.28-3/4 a bushel, and September wheat gained 8-1/4 cents to US$9.44-3/4, a new 4-year high.

Much of the U.S. winter wheat crop has already been harvested, escaping the worst of the drought. But corn in the heart of the Midwest is struggling with pollination, its key growth stage, and soybeans are being stressed as they enter their pod-filling stage, the key for final yields.

“Everything today is focused on the weather for soybeans,” said Karl Setzer, an analyst at MaxYield Cooperative in West Bend, Iowa.

“Historically, August is when the soy yield is determined, but because everything is early this year, we are seeing the buying interest show up earlier. We know we've lost corn yield, but we don't know how much.”

Rains this week provided little relief, said Don Keeney, meteorologist for MDA EarthSat Weather, and more searing heat was in the forecast for the week ahead.

“It will be dry and very hot in the area with temperatures in the 100s (degrees Fahrenheit) in St. Louis Sunday through Thursday, reaching 106 on Wednesday.”

“It's the same old general theme: dry in the southwest Corn Belt and some showers in the north and east,” said Drew Lerner, a meteorologist for World Weather Inc.

Corn, soybean and dairy farmers in Iowa County, Wisconsin, were glad for 1-1/4 inches of rain late this week, the county's agricultural agent Gene Schriefer said.

“We are smiling, but we are going to need more rain,” he said, noting that soil below the surface was still extremely dry. “It's going to be a case of just living hand to mouth on moisture for the rest of the summer.”

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A grasshopper sits on a dried-up leaf on a stalk of corn in a field near Edmond, Oklahoma, Thursday, July 19. Oklahomans are bracing for another hot, dry summer as the drought in the state intensifies and forecasters say triple-digit heat with little chance of rain is to continue. (AP)

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