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USDA data slams corn futures

06/12/2013 @ 3:51pm

Corn futures prices fell after U.S. forecasters cut their projections for domestic corn supplies next year by less than analysts had expected and reiterated expectations that farmers will produce a record crop this autumn.

In a monthly report Wednesday, the U.S. Department of Agriculture estimated that U.S. corn stockpiles next summer will total 1.949 billion bushels, a nearly 3% decline from its forecast last month but smaller than the 12% drop that analysts had projected.

The USDA trimmed its supply estimate because it said delayed plantings this spring in the Midwest had reduced the likely size of this year's corn harvest. Heavy rains and cool temperatures kept many farmers from sowing their crops on a normal schedule.

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The USDA predicted that this fall's corn harvest will total 14.0 billion bushels, down from the 14.1 billion it projected last month. But the government's projected harvest still would break the current record of 13.1 billion set in 2009, and would mark a 30% increase over last year's production, when the worst U.S. drought in decades battered crops across the Farm Belt.

The USDA's forecast for corn stockpiles of 1.949 billion bushels late next summer would mark the highest supply level for that time of year since 2006.

Corn futures for July delivery, the front-month contract, settled down 8 3/4 cents or 1.3% at $6.50 3/4 a bushel at the Chicago Board of Trade.

Though many analysts were looking for a sharper cut in the USDA's supply forecast, the government's forecasts "met expectations for the most part," said Shawn McCambridge, senior grains analyst with Jefferies Bache in Chicago. He said he thinks the USDA is overstating how much corn acreage is being planted.

The USDA in March forecast that U.S. farmers this year would plant 97.3 million acres of corn, the most since 1936. While many analysts expect final acreage to be lower due to the planting delays, the USDA hasn't yet updated its forecast.

The USDA appears to believe acreage losses due to a wet spring may be limited, said Joel Karlin, a market analyst for Western Milling, a Goshen, Calif., firm that sells feed grains to livestock and poultry companies.

Still, he said, "I think the USDA is telegraphing that things could get pretty bearish." The same rainfall that raised worries about late planting has also improved soil conditions, which will benefit crops this summer.

"The market is gradually shifting to the mentality that 'rain makes grain,' " Mr. Karlin said.

Corn prices surged to a record last August as an historic drought battered the nation's crop. But futures since have dropped 22% from the record closing price of $8.31 1/4, due to tepid demand from foreign buyers of U.S. corn and large harvests in South America this year. Expectations for a large U.S. crop this fall also have weighed on prices.

The USDA projected that domestic corn crops this year will produce 156.5 bushels per acre, down 1.5 bushels from its estimate last month, due to the slower-than-normal planting pace in the Midwest. Late planting curbs yield expectations partly because it leaves crops more vulnerable to summer heat during important growth periods.

As of Sunday, 95% of the nation's corn crop had been planted, behind the historical average of about 98% at this point in the year.

Also Wednesday, the USDA cut its estimate of China's corn harvest last year by 2.4 million metric tons to 205.6 million tons, citing a revision of Chinese government figures.

Wheat futures prices fell as the USDA raised its forecast for U.S. wheat production this year, instead of cutting its estimate as analysts had expected.

The report forecast domestic wheat output this year at 2.08 billion bushels, up 1% from the agency's previous projection due to better expected crop yields for wheat about to be harvested in the southern Plains and the Midwest.

The USDA forecast domestic wheat stockpiles as of May 31, 2014--the end of that crop's marketing year--will total 659 million bushels, higher than the 634 million bushels expected by analysts.

The USDA also cut its forecasts for world wheat production and stockpiles in the 2013-14 crop year. But world stockpiles are still expected to rise to 181.25 million metric tons, up 1% from the end of the previous crop year.

CBOT July wheat futures settled down 13 3/4 cents, or 2%, at $6.83 a bushel.

Soybean futures ended mixed after the USDA forecast domestic soybean stockpiles at the end of next summer will total 265 million bushels, unchanged from its projection last month. The forecast was below the average analyst prediction of 273 million bushels.

The USDA also cut its estimate of Brazil's most recent soybean harvest by 1.5 million tons to 82 million tons, citing dry conditions in the country's northeast. After the change, Brazil is no longer expected to surpass the U.S. as the world's largest soybean producer.

CBOT July soybean futures settled up 1/4 cent, or 0.02%, at $15.40 3/4 a bushel. November soybeans, associated with supplies to be harvested this fall, fell 12 3/4 cents or 1% to $13.14 1/4 a bushel.


-Ian Berry and Mark Peters contributed to this article.
Write to Owen Fletcher at owen.fletcher@dowjones.com
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(END) Dow Jones Newswires
June 12, 2013 15:22 ET (19:22 GMT)
DJ 2nd UPDATE: Corn Futures Fall After USDA Report->copyright


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