Makers of farm equipment and fertilizers posted some of the strongest moves in Monday’s rally as corn and soybean prices added to recent gains.
Corn is now up more than 30% from a July low, pegging new highs as markets brace for a weather-dented harvest.
A closely watched industry report, the Pro Farmer Midwest Crop Tour, released forecasts after Friday’s market close for corn crop yields to be sharply below levels previously forecast by the U.S. Department of Agriculture.
Pro Farmer calculated drought, hail and heat damage would pressure yields 6.3% below USDA forecasts in Illinois, down 14% in Indiana and off 6% in Ohio.
While the total crop is still likely to produce a record harvest of more than 12.4 billion bushels, rising demand means supplies could be stressfully tight.
This is bad news for corn buyers (including the general public, which will eventually pay higher food costs). And it has some livestock producers discussing the potential for feed rationing this fall.
A tight harvest would also suggest record corn prices until farmers plant more corn. That, in turn, leads to demand for tractors, as well as potassium and nitrogen fertilizers.
The news sent farm equipment makers AGCO (AGCO) and CNH Global (CNH) up more than 7%, although trade was light. The group heavyweight, Deere (DE), rose 4%, also in light trade.
In the fertilizer group, Intrepid Potash (IPI), Terra Nitrogen (TNH) and Mosaic (MOS) all posted 5% gains. CF (CF), CVR Partners (UAN) and Sociedad Quimica Y Minera (SQM) were among those to post 4% advances. All the moves also rode lighter trade.
The most significant agriculture sector move to occur in heavy trade was made by Monsanto(MON).
The seed strain developer recovered to a 2% loss after falling 5% in early trade. A news report said a "few Iowa fields" showed evidence that rootworm larvae had resisted crops genetically engineered by Monsanto to fight the pest.
The finding raised concerns that the widely used seed strain may be ineffective against subsequent generations of the bug.
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