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UPDATE 1-U.S. government cuts corn, soy supply view on harvest setbacks

(Recasts, updates with details on supplies, adds analyst quote, price reaction, byline)

By Mark Weinraub

CHICAGO, Sept 12 (Reuters) - U.S. corn and soybean supplies will fall to multi-year lows as hot and dry weather during August in western growing areas cut into the harvest potential for both crops, the government said on Monday.

The U.S. Agriculture Department cut its outlook for U.S. corn end stocks in the 2022/23 to a 10-year-low of 1.219 billion bushels, from 1.388 billion. Soybean supplies were seen at a seven-year low, of 200 million bushels.

The world was counting on massive U.S. production this fall, to help make up for diminished grain exports from war-torn Ukraine. Though recent Black Sea-area shipments of grain have flowed into the global market in recent weeks, continued geopolitical unrest and supply chain uncertainty has sent ructions through the futures market in the past week.

Chicago Board of Trade soybean futures surged after the report was released, with the most-active contract up 4.2% and on pace for its biggest daily gain in 2-1/2 months. Corn futures rallied to their highest since June 28.

"The bean yield came in well below the low-end of expectation" and that, along with USDA's drop in harvested soybean acres, is what is giving soy futures its strength today, said Ted Seifried, vice president of Zaner Group.

Farmers will likely harvest a corn crop of 13.944 billion bushels, based on an average yield of 172.5 bushels per acre, the USDA said in its monthly World Agricultural Supply and Demand Estimates report. If realized, that would be the smallest U.S. harvest in three years.

Soybean harvest was pegged at 4.378 billion bushels, with average yields seen at 50.5 bushels per acre.

Analysts had been expecting a corn production figure of 14.088 billion bushels, based on a yield of 172.5, according to the average of estimates in a Reuters poll of analysts. Average trade forecasts for soybean production and yield were 4.496 billion bushels and 51.5, respectively. (Additional Reporting by P.J. Huffstutter. Editing by P.J. Huffstutter and Bernadette Baum)

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