Just when you think the crop forecasts for the upcoming harvest year can’t get any worse, they do.

On June 9, the U.S. Department of Agriculture’s regular crop report lowered the outlook for this year’s corn harvest. End of the year inventories are likely to remain at levels near 15-year lows. Not surprisingly, the report sent corn futures to an all-time high of $7.90 a bushel on June 9 at the Chicago Board of Trade. In early trading this morning corn had pulled back about 1.4%.

The problem, as it has been during all of planting season this year, is wet weather that has delayed putting seeds in the ground. Planting delays don’t guarantee harvest disasters but crops that miss the optimum-planting window tend to produce lower yields per acre. More than one-third of Midwest fields, for example, were planted after the mid-May target for optimal growth due to excessive rain.

That wouldn’t be a big deal if existing inventories weren’t so low. Corn buyers and consumers—and that includes everybody from McDonald’s (MCD) to Tyson Foods (TSN) to you and me—have been hoping for a harvest big enough to rebuild end-of-year supplies. (McDonald’s raised its menu prices by 1% in May in response to higher commodity prices. The USDA report isn’t good news for inflation or consumer wallets.) That’s looking less and less likely. Read more

Corn hits a record high and only lower oil prices look capable of bringing relief

“Essentially, we don’t have any corn,” a Minnesota commodity broker told the Financial Times yesterday.

And that about sums it up. According to earlier projections, corn stocks are will drop to a 15-year low of 675 million bushels by the end of the marketing year on August 31.

That may be the good news. On Friday, April 8, the commodity markets worry, the U.S. Department of Agriculture could release new projections showing that by the end of August U.S. corn stocks will equal just four days of supply. The USDA could cut its projections to 525 to 575 million bushels. The all-time end of season inventory low was 426 million bushels in August 1996.

You can guess what this has done to the price of corn. Read more

Update Yara International (YARIY.PK)

Do Norwegian’s grin? Surely that was a trickle of a smile at Yara International’s (YARIY.PK)  annual update for investors on December 10.

The Norwegian fertilizer company reported that the nitrogen fertilizer market was headed for demand-driven price increases in the first half of 2010. Urea supply, a major form of nitrogen fertilizer, should remain tight in 2010 with only three projects likely to come on line. Supply (ex-China) in 2010 will increase by 3%, according to Deutsche Bank, while demand will climb 5%, the bank projects. Chinese exports are likely to remain limited in 2010 as higher production costs limit the competitiveness of Chinese urea. Yara International plants ran at about 63% of capacity in 2009 and these scenarios should result in a pickup to near 80% of capacity.

Time to up my targt price, I believe. Read more