July 11 (Bloomberg) -- Corn futures surged to the highest price since September after the U.S. Department of Agriculture cut its production and inventory estimates more than analysts predicted amid the worst drought since 1988.
Farmers will harvest 12.97 billion bushels (329.45 million metric tons) this year, down 12 percent from a June prediction of 14.79 billion bushels, the USDA said today in a report. Analysts expected 13.534 billion, based on the average of 14 estimates in a Bloomberg survey. Inventories before the 2013 harvest may be 1.183 billion bushels, 37 percent less than the 1.881 billion forecast last month, the USDA said.
“The USDA cut production more than expected, and the crops are still declining with little rain and hot temperatures in the forecasts for the next 10 days,” Mark Schultz, the chief analyst at Northstar Commodity Investment Co. in Minneapolis, said in a telephone interview. “We are going to get into some serious rationing of supplies this year.”
Corn futures for December delivery rose 2.5 percent to $7.3575 a bushel at 8:01 a.m. on the Chicago Board of Trade, after reaching $7.48, the highest for the most-active contract since Sept. 13.
Prices through yesterday surged 42 percent since mid-June as areas of moderate to extreme drought expanded to 53 percent of the Midwest. Crop conditions as of July 8 were the worst for that date since the drought of 1988, government data show.