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Soybeans skyrocket Monday

08/12/2013 @ 3:11pm

Corn prices rose Monday after the U.S. Department of Agriculture cut its forecast for the size of this fall's crop, though the harvest would still be the nation's largest ever.

Corn futures climbed 1.3% after the government said the corn crop will total 13.8 billion bushels. That is down 1.3% from the USDA's estimate last month, but would easily break the record of 13.1 billion bushels set in 2009.

The government trimmed its production estimate because it expects lower yields than it had projected last month. The USDA didn't explain why, but noted that its yield estimate was the first of the season based on surveys of farmers and field inspections. It trimmed projected yields to 154.4 bushels an acre, from 156.5 last month.

The report surprised analysts, who largely expected that favorable weather this summer would lead the USDA to increase its production forecast.

"Not many people were expecting the corn yield to be cut," said Jim Gerlach, president of A/C Trading Co., a Fowler, Ind., commodities brokerage. Analysts on average were looking for a yield of about 157.7 bushels an acre.

Still, the government's report affirmed expectations that the U.S. is likely to produce a huge crop a year after severe drought led to a steep drop in production. Those expectations had led to sharp declines in corn futures prices from a year ago. Corn farmers in much of the U.S. Midwest enjoyed relatively cool weather and adequate rainfall as the crop underwent its key growth stage in recent weeks.


Corn futures for September delivery, the front-month contract, settled up 6.25 cents, or 1.3%, at $4.72 a bushel at the Chicago Board of Trade. December corn futures, the contract most closely aligned with the fall harvest, rose 10.75 cents, or 2.4%, to $4.64 a bushel.

Corn prices have tumbled more than 40% from the record settlement of $8.3125 a bushel hit last summer amid the drought. Futures have fallen amid expectations for a big U.S. harvest this fall, increased production in South America and weaker exports for the U.S. crop.

Corn prices are trading at nearly three-year lows, a major shift that is expected to ripple across a U.S. farm economy that has flourished for much of the past half-decade. Lower corn prices are expected to ease food inflation for U.S. consumers and reduce costs for meat producers, but they will squeeze farmers' profit margins and could reduce demand for tractors and other farm equipment.

In recent years, historically high prices have prompted farmers to plant big corn crops. Corn acreage this year totaled 97.4 million acres, the most since 1936, the USDA estimated.

In its crop report Monday, the agency estimated that corn stockpiles prior to next year's harvest will total 1.837 billion bushels, below analysts' expectations and down 6% from its forecast last month. That still would mark the highest supply level for that time of year since 2006.

The government also cut projected yields and production for the nation's soybean crop, sending soybean futures prices higher. The USDA said the soybean crop would total 3.255 billion bushels, down 5% from its estimate in July. That would still mark the nation's third-largest soybean crop, trailing harvests in 2009 and 2010.

The government trimmed its soybean yield per acre forecast to 42.6 bushels, from the prior reading of 44.5 bushels. Analysts expected the USDA to cut its soybean yield forecast to 43.6 bushels, because much of the crop was planted late after a rainy spring.

CBOT August soybean futures rose 33 cents, or 2.5%, to $13.7375 a bushel, a more than one-week high. Soybean futures have dropped 22% from last September's record settlement of $17.71 a bushel.

The report was supportive for both soybeans and corn, but are based on crop estimates that are still prone to significant change, said Sterling Smith, a futures specialist with Citi in Chicago. He said rains in parts of northwest Iowa and eastern Nebraska during the past week may have already changed the outlook for the crop for the better.

"The report hit markets that were oversold and dry as kindling," Mr. Smith said. "When that happens--'poof.'"

Mr. Smith said that while corn and soybeans have bounced initially, they are both likely to remain bear markets. In corn, "we are still looking at mammoth [stockpiles] and a big crop."

The government's forecast for wheat production for the 2013-14 marketing year is 2.114 billion bushels, unchanged from the July reading. Analysts expected a forecast of 2.106 billion bushels. The wheat marketing year began June 1.

CBOT September wheat futures rose 1.5 cents, or 0.2%, to $6.35 a bushel.

-Ian Berry and Kelsey Gee contributed to this article.
Write to Owen Fletcher at owen.fletcher@dowjones.com
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(END) Dow Jones Newswires
August 12, 2013 15:14 ET (19:14 GMT)
DJ UPDATE: U.S. Corn, Soybeans Rise on USDA Crop Forecasts->copyright

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