Salient to Investors:

Corn supplies in the U.S. are declining at the fastest pace since 1996.

The worst Midwest drought in more than a decade is wilting a harvest that the U.S.D.A. says will be the biggest ever.

Dennis Gartman at the Gartman Letter said the harvest is about two months away and dry weather across the main growing region comes as plants begin to pollinate – the most vulnerable period in the growing cycle.

University of Nebraska said about 71 percent of the Midwest had abnormally dry soil to extreme drought on June 19, the worst in more than a decade.

Global demand for corn has expanded for 16 straight years. World inventories on Oct. 1, 2011, were equal to about 15 percent of consumption, the lowest ratio since 1974, while U.S. yields slowed to annual gains of 1.8 percent since 1996, from 4.3 percent in the four decades to 1970.

Stockpile forecasts by analysts and traders missed the USDA’s figures in the past two years by twice as much as in the previous five years, while inventories are getting harder to predict as growers build more silos on their land rather than using commercial grain elevators.


Peter Meyer at PIRA Energy Group sees a potential disaster developing for the U.S. corn supply.

Luke Chandler at Rabobank Intl said slower growth and rising Brazilian supply may contain the rally, while purchases by U.S. ethanol refiners may weaken after retail gasoline prices tumbled 14 percent to $3.397 a gallon from a 10-month high on April 4.

Hedge funds et al remain less bullish than over most of the past two years.

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