Corn and wheat prices shot up Tuesday as the Coast Guard closed a port on the Mississippi River because of flooding.
The Coast Guard said it closed the port in Natchez, Miss. because barge traffic could increase pressure on the levees and might not be able to operate safely in the flooded river.
The Mississippi is a major avenue for grain exports to reach the Gulf of Mexico and overseas markets. The port closure could temporarily disrupt grain shipments in a market where global supplies are already tight.
In contracts for July delivery, wheat jumped 27.5 cents, or 3.7 percent, to settle at $7.64 a bushel. Corn rose 22.75 cents, 3.3 percent, to $7.2025 a bushel and soybeans rose 14.5 cents, 1.1 percent, to $13.41 a bushel.
Supplies of corn, wheat and soybeans are all at historically low levels, making traders nervous about even relatively small supply disruptions. Investors were already worried about the slow pace of planting in the northern Farm Belt states, said John Sanow, an analyst with Telvent DTN.
Cold temperatures and rain have stalled planting in critical states like Indiana and Ohio, Sanow said. Even if planting had gone perfectly, backup supplies of corn and soybeans would still be tight. Flooding along the Mississippi has only worsened the supply squeeze.
"We needed to have every acre" planted, Sanow said.
Corn and soybeans are both exported by barge out of the Mississippi River. Several barges were idled at Natchez at the time of the closure, and many more could back up along the major artery for moving grain from farms in the Midwest to the Gulf of Mexico.
It wasn't clear when the river would reopen, but port officials said the interruption could cost the U.S. economy hundreds of millions of dollars per day.
The long-term impact on corn prices won't likely be drastic, Sanow said. While exports might be delayed, they won't be canceled.
Metals prices were mixed. Gold for June delivery fell $10.60 to settle at $1,480 an ounce. July silver fell 64.1 cents to settle at $33.491.
July copper gained 0.8 cents to $3.9985 a pound, July platinum rose $1 to $1,761 an ounce and June palladium gained 75 cents to close at $714.25 an ounce.
Oil fell after disappointing reports on factory production and new home construction raised more concerns about the economic recovery and future demand.
The Federal Reserve said factory production fell 0.4 percent in April, the first decline in 10 months. A key reason was a drop in auto manufacturing after the earthquake and tsunami disaster in Japan led to a parts shortage. Overall, industrial production has risen nearly 11.5 percent since hitting a recession-low in June 2009 but is still below its pre-recession peak in September 2007.
The Commerce Department reported that new home construction fell 10.6 percent last month from March.
Benchmark oil for June delivery dropped 46 cents to $96.91 a barrel on the New York Mercantile Exchange.
In other Nymex contracts for June, heating oil fell 2.93 cents to settle at $2.8451 per gallon, gasoline fell 1.18 cents to $2.9193 a gallon and natural gas fell 13.3 cents to $4.246 per 1,000 cubic feet.