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USDA raises soy forecast, lowers corn

10/11/2012 @ 9:44am

U.S. forecasters Thursday boosted their estimates for the size of this fall's soybean harvest, as rainfall late in the growing season mitigated the impact of a severe drought.

The Department of Agriculture slightly lowered its projection for the corn harvest, a crop that already was far along in its growth when rains soaked parts of the Farm Belt in late August and early September.

For both corn and soybeans--the country's largest row crops--the USDA forecast tighter domestic supplies a year from now than analysts were expecting. That led to a jump in futures prices Thursday morning. Corn futures recently were up 3.3% at the Chicago Board of Trade, while soybean futures were up 1.2%.

As the worst U.S. drought in decades pummeled crops over the summer, corn and soybean prices soared to all-time records. While prices have fallen in recent weeks from the record levels, they remain at historically high levels and are starting to trigger higher food prices for U.S. consumers. The higher grain costs are hitting U.S. livestock and poultry companies especially hard, contributing to the bankruptcy filing this week by California poultry producer Zacky Farms LLC.

In its monthly crop report Thursday, the government estimated that farmers will harvest 2.86 billion bushels of soybeans this fall, up 9% from its estimate last month. The soybean crop would still be the nation's smallest in five years. Nearly 60% of the soybean crop has been harvested, the government said earlier this week.

The USDA again reduced its forecast for corn production, but by less than analysts expected. It estimated the corn crop will be 10.706 billion bushels, down slightly from the 10.727 billion bushels it projected last month. The harvest would be the nation's smallest in six years.

The government lowered its projection for corn yield, or harvested bushels per acre, to 122 from 122.8 a month ago. That would mark the lowest yield in the U.S. since 1995, which shows how blistering heat and a dearth of rainfall in the Midwest this summer hammered the country's largest row crop. In the spring, farmers planted the most corn acreage in the U.S. since 1937, and the government at that time was forecasting the largest harvest in the nation's history.

In Thursday's report, the USDA projected unusually tight U.S. supplies of both soybeans and corn in the coming year.

It forecast domestic soybean inventories next August, the end of the 2012-13 crop year, at 130 million bushels, below analyst estimates of 134 million.

Soybean supplies will tighten in part because of strong, China-led export demand. The USDA boosted its demand forecasts for domestic soybeans even as it also projected a larger crop. The government raised its forecast for soybean exports in the 2012-13 marketing year by 20%.

Though the U.S. soybean harvest won't be as poor as analysts once feared, "it's definitely not something we can get complacent with," said Tregg Cronin, an analyst with brokerage Country Hedging in St. Paul, Minn. "For every bushel of supply that they created, they took it away with demand."

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