Corn harvest

Despite diplomatic tensions between the countries, the U.S. Department of Agriculture announced almost 4 million metric tons of corn sales to China last week. In this file image, corn is harvested on a large commercial farm near Hector, Minn. 

Corn futures surged above $7 a bushel for the first time in more than eight years as lack of rainfall in Brazil added to supply concerns.

Corn climbed as much as 3.5% to $7.0325 a bushel on the Chicago Board of Trade, the highest since March 2013. Soybeans and wheat also both rose.

The rally across grain markets prompted major crop trader Bunge Ltd. on Tuesday to raise its earnings outlook for 2021 by as much as 25% above its previous forecast. The St. Louis-based company, which posted first-quarter earnings that were double analyst projections, is betting on strong demand for crops as the world emerges from the pandemic, China scoops up American supplies and the renewable diesel industry expands.

China has been buying massive amounts of American soybeans and corn to rebuild the world’s largest hog herd. That’s helping lift prices just as dry weather hits crop yields in South America and Europe. The tailwinds have also lifted Bunge’s rival, Archer-Daniels-Midland Co., which last week reported its best-ever earnings for its traditional crop-trading business.

“We are optimistic that the favorable demand environment in the first quarter will continue through 2021,” said Greg Heckman, Bunge chief executive officer.

Dryness is hampering Brazil’s key second-crop corn, and rain in the coming week will fail to reach some key growing areas, according to Somar. That could further hurt yields, and analysts including Safras and StoneX Brazil have cut estimates for the coming harvest. A production shortfall there would compound stretched global grain supplies and risk further stoking food inflation.

“The situation is critical in Brazil,” Paris-based adviser Agritel said in a report. “This should further strain the global balance sheet, while the U.S. will have to partly compensate for the drop in South American exports.

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