Corn, Wheat Spike After U.S. Cuts Forecasts on Midwest Flooding

(Bloomberg) -- Corn’s waning rally snapped back to life after the U.S. government predicted a deluge in the country’s grain belt will harm supply more than analysts expected.

In a report Tuesday, the U.S. Department of Agriculture said domestic corn yields would be the lowest since 2013 as relentless rain keeps planting progress at the slowest pace on record. This season’s output will be 13.68 billion bushels, the USDA said. Analysts expected 14.04 billion on average.

The “aggressive” 9% reduction from the USDA’s previous projection “probably fulfilled a lot of bullish hopes,” said Rich Nelson, chief strategist at Allendale Inc. in McHenry, Illinois.

Corn, Wheat Spike After U.S. Cuts Forecasts on Midwest Flooding

Corn futures for July delivery rose as much as 3.5% to $4.3025 a bushel, the contract’s biggest intraday gain this month. The price fell as much as 1.8% before the World Agricultural Supply and Demand Estimates report was released. Options volume also jumped.

In May, the grain surged 18%, a record for the contract that debuted in January 2016. Through Monday, the commodity slid 5.1% from the May peak, partly on U.S.-Mexico tariff turmoil.

Wheat futures for July delivery rose as much as 2.2% to the highest in a week. Earlier, prices fell as much as 1.4%.

The contiguous U.S. had its wettest January to May on records going back to 1895, according to the U.S. National Centers for Environmental Information in Asheville, North Carolina.

DateYield after cutAmount of cutReason
Aug. 2012123.4-22.6Drought
July 2012146.0-20.0Drought
Aug. 2002125.2-10.6Drought
June 2019166.0-10.0Late planting
Oct. 2010155.8-6.7Rains then dryness

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