Heat wilts corn as supply drops most since 1996

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CHICAGO — U.S. corn supplies are declining at the fastest pace since 1996 just as a Midwest heat wave damages the world’s largest harvest for a third consecutive year.

Stockpiles in the United States, the world’s biggest exporter, were probably 3.168 billion bushels (80.47 million metric tons) on June 1, 47 percent less than on March 1, the average of 22 analyst estimates compiled by Bloomberg shows.

The worst Midwest drought in more than a decade is wilting a harvest that the U.S. Department of Agriculture says will be the biggest ever.

The agency updates its inventory estimate Friday and its production forecast two weeks later.

Futures surged 25 percent since reaching a 20-month low June 15, and Morgan Stanley expects prices to advance another 10 percent to $7 a bushel in two months if the drought persists.

The rally is boosting global food costs that the United Nations estimates dropped 14 percent from a record in February 2011 and widening losses for ethanol producers including Decatur, Ill.-based Archer Daniels Midland Co.

“We have a potential disaster developing for the U.S. corn supply,” said Peter Meyer, the senior director for agricultural commodities at PIRA Energy Group in New York who cut his corn-crop forecast after surveying fields in Illinois, Indiana and Ohio last week. “This year may be the worst yet.”

The USDA forecast June 12 that pre-harvest stockpiles at the end of August would plunge to a 16-year low of 21.62 million tons.

That’s a 50 percent decline in two years, the most since 1990.

Standard Chartered forecast Tuesday a third-quarter average of $7 a bushel, a record for the period.

The cost of an option conferring the right to buy at $7 by the end of November rose fourfold since mid-June, CBOT data show.

Tags: news, updates, weather, heat, corn, crop, agriculture