Transcripts

Corn Prices Continue To Pop As Flood Waters Rise

JEFF YASTINE: It's been a week of record-breaking corn prices at the Chicago Board of Trade. Fears that damaging floods in the Midwest could wipe out much of the U.S. corn crop have sent corn futures prices to historic highs. As Diane Eastabrook reports, forecasts for dryer weather are shaking some, but not all of the volatility out of the market.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: In the corn (INAUDIBLE) this morning at the Chicago Board of Trade, business was frenzied, but at least more controlled. Corn futures were still above $7 a bushel, but price movements were less extreme than previous days. Traders say forecasts for dryer weather this weekend in the Midwest and a stronger dollar calmed the jittery corn futures market, rattled all week by flooding in the nation's heartland. Still, veteran corn trader Victor Lespinasse said the current flooding reminds him of the last devastating floods.

VICTOR LESPINASSE, CORN TRADER, ILLINOIS GRAIN: We're getting close to a repeat of '93 and we can't afford it this year.

EASTABROOK: In the past few weeks, heavy rains have soaked portions of the Midwest, turning many farm fields into lakes. The worst flooding has been in Iowa. Even in areas not under water, Indiana farmers like Russell Meade say corn that should be knee high is only ankle high.

RUSSELL MEADE, FARMER: To have corn this low, I haven't seen it this low since I started farming 10 years ago.

EASTABROOK: The flooding prompted the U.S. Department of Agriculture to revise downward its corn production forecast. This week, the U.S.D.A. estimated farmers wills harvest about 11.7 billion bushels of corn this fall. Just a month ago, it projected a 12 billion bushel harvest. The government also said inventories of corn have fallen by 90 million bushels. The meager projections come at a time when grain demand is at record highs. But analysts think some users of corn are beginning to reduce demand because of rising prices. They say farmers are liquidating more livestock herds and some ethanol plants are cutting back on production of the corn- based fuel. Still, Shaw McCambridge, senior grain analyst for Prudential Bache commodities, thinks it could be awhile before corn prices come off of their highs.

SHAWN MCCAMBRIDGE, SR. GRAIN ANALYST, PRUDENTIAL BACHE COMMODITIES: in order to push it back to prices down around the $5 level, we are probably going to wait until I think probably until next year and see how production goes, because right now we're focused on the supply side of the market. The supply side is really under a lot of stress right now.

EASTABROOK: In a couple of weeks, the U.S.D.A. will report just how many acres of corn U.S. farmers were able to plant this spring. But traders here say that (INAUDIBLE) won't reflect the damage from the flooding, so prices for corn could remain volatile for several more weeks. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.