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Corn futures bounce to a 7-year excessive on provide considerations 

Farmer Roger Hadley harvests corn from his fields in his John Deere mix on this aerial {photograph} taken over Woodburn, Indiana.

Bing Guan | Reuters

Corn futures continued their sharp climb on Monday, hitting their highest degree in additional than seven years and and triggering a pause in buying and selling on the Chicago Board of Commerce.

The futures contracts traded at greater than $6.50 per bushel early Monday, up greater than $1 per bushel since late March. The value spike has come as harsh climate within the Higher Midwest has raised considerations about corn provide amid a broader rise for commodities costs.

“With drought situations in North and South Dakota persevering with to worsen there’s added danger to the 2021 planting season which might strain provide in an already tight market … The 2 states account for a majority of the nation’s wheat manufacturing, and ~7.5% of corn manufacturing, and ~10% of soybeans,” Jefferies stated in a notice to shoppers earlier this month.

Corn’s bounce comes amid a broader surge in commodities costs, with wheat futures additionally hitting their highest degree since 2013 on Monday. Lumber futures have additionally soared in current weeks.

“The value surge and the already excessive value degree, particularly within the case of corn, additionally replicate the nervousness in view of the present tightness on the markets, which is predicted to be repeated in 2021/22,” Commerzbank stated in a notice to shoppers final week.

The CME Group has value limits for various merchandise, together with equities and commodities futures, to handle intraday volatility. When a product rises or falls to a pre-set degree, as corn futures appeared to on Monday, the trade can quickly halt buying and selling.

Corn futures have been final up about 3% on Monday.

Rising commodities costs are additionally more likely to stoke fears about potential inflation. The chief monetary officer of Normal Mills stated through the firm’s March earnings name that the meals merchandise firm deliberate to boost costs to offset increased enter prices.

Economists on the Federal Reserve and the Biden administration have stated {that a} short-term rise in inflation is predicted within the coming months attributable to a number of elements, together with low demand brought on by Covid-19 final yr and client spending fueled by federal stimulus. Nevertheless, the value will increase might show to be transitory and inflation might normalize as soon as the preliminary jolt of the reopening has handed.

The sharp rise in costs doesn’t essentially imply {that a} corn scarcity is imminent. In line with the U.S. Division of Agriculture, the quantity of corn planted via April 18 was roughly equal to the common over the previous 5 years.

A beneficiary of rising costs for corn and different merchandise might be agricultural firms like Archer-Daniels-Midland. The corporate’s inventory has jumped almost 20% because the finish of January, and Financial institution of America gave the inventory a purchase ranking on Wednesday citing “a renewed Ag cycle that’s anticipated to final a number of years and probably for much longer.”

-CNBC’s Michael Bloom contributed to this report.

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