USDA cuts forecasts for corn, soybean production
U.S. corn futures rose 2% on Wednesday after the government slashed its forecast for this year's harvest, projecting that the crop is no longer likely to set a record because of a drought in the Midwest.
Corn prices jumped after the U.S. Department of Agriculture pared its estimates for corn yields this fall by a higher-than-expected 12% from its forecast last month.
Front-month corn futures moved within about 15 cents from an all-time high, and deferred futures climbed to contract-life highs, though futures gave up some of their gains as trade continued.
The USDA, in the monthly supply-and-demand report, lowered its corn-yield forecast to 146 bushels an acre from 166 bushels an acre. Analysts on average had expected the USDA to project a yield of 154.1 bushels an acre, according to a Dow Jones Newswires poll.
The USDA now projects a corn harvest of 12.97 billion bushels, down from its record-breaking previous forecast of 14.79 billion bushels and below the previous record of 13.09 billion bushels in 2009. Production in the U.S., the world's biggest corn producer and exporter, would still be up from 12.36 billion bushels last year.
"Persistent and extreme June dryness across the central and eastern corn belt and extreme late June and early July heat from the central Plains to the Ohio River Valley have substantially lowered yield prospects across most of the major growing regions," the USDA said.
The hot, dry weather in much of the corn belt is hitting the crop just as it undergoes its delicate pollination stage, when moisture has its biggest influence on potential yields.
Chicago Board of Trade corn futures for July delivery, thinly traded ahead of the contract's expiration on Friday, were up 14 cents, or 1.8%, at $7.75 a bushel at 9:16 a.m. EDT. December corn was up 15 1/4 cents, or 2.1%, to $7.32 3/4 a bushel.
The USDA also cut its yield forecast for the soybean crop to 40.5 bushels per acre from 43.9 bushels per acre, due to the drought in the Midwest. Analysts on average had expected a smaller cut, to 42.3 bushels an acre.
Soybean production this year is now forecast at 3.05 billion bushels, about 5% lower than the 3.205 billion bushels USDA predicted in June.
Lower production will mean weaker exports, lower domestic stocks and reduced soymeal and soyoil production, the USDA said.
"Soybean crush is projected at 1.61 billion bushels, down 35 million reflecting the impact of higher soybean meal prices on meal exports and domestic disappearance," the USDA said. "Soybean exports are for 2012-13 are reduced 115 million bushels to 1.37 billion, reflecting lower U.S. supplies."
Soybean futures also rose on the USDA forecasts. Thinly traded July soybeans were up 24 1/4 cents, or 1.5%, at $16.73 a bushel. November soybeans were up 28 1/2 cents, or 1.9%, at $15.67 a bushel. Soybean futures set new all-time highs on Monday.
USDA cut its forecast for corn exports in the 2012-13 marketing year by 300 million bushels to 1.6 billion bushels and also said less of the crop will be going to make ethanol.