Farm stocks ran wild Friday after the government took an ax to its corn crop forecasts.
The price of corn and soybean futures for December delivery surged 6% after the Agriculture Department said this year's corn crop will come in smaller than last year's record output.
The USDA trimmed its corn crop forecast by 3.8% from last month's level to 12.66 billion bushels after determining that the national average yield per acre will drop almost 7%, thanks to bad weather in Indiana, Iowa and Illinois. U.S. corn output last year was 13.1 billion bushels.
"We knew there were problems, but I don't think anyone thought the government would react this quickly," said Jerry Gulke, a farmer and Chicago commodities broker. "This is the fifth or sixth time lately we've seen them have a major impact on the market with a forecast change."
The move sent corn sellers soaring, with the Teucrium Corn Fund (CORN) exchange-traded fund climbing 14% to $37 a share. Other beneficiaries included tractor maker Deere (DE), up 5% at $76 after hitting a 52-week high, and the embattled pesticide maker Monsanto (MON) up 4% at $51. Fertilizer maker Bunge (BG) rose 3% to $60.
Meanwhile, corn users such as chicken processor Tyson (TSN) tumbled. Tyson dropped 8% and Sanderson Farms (SAFM) slid 5%.
The surge comes as commodity prices have been rising, as the Fed considers policies that may further depress the value of the dollar. Low interest rates, questions about the dollar's purchasing power and the perception that China will be importing more U.S. grains, notably soybeans, are combining to make farmland look like a strong investment, Gulke said.
"I can make 5%-6% a year renting out farmland right now," he said. "It has been a long time since you could say that about stocks."