Corn production in the U.S., the world’s largest grower and exporter, will drop 13 percent to a six-year low after the worst drought in more than 50 years damaged Midwest fields, the government said. Analysts were expecting an even bigger decline.
The harvest will total 10.727 billion bushels, compared with 12.358 billion in 2011, the U.S. Department of Agriculture said today in its second survey-based estimate for the crop. Last month, the USDA said production would fall to 10.779 billion. The average prediction of 35 analysts surveyed by Bloomberg was for 10.420 billion bushels. Supplies of the grain on Aug. 31, 2013, will be greater than analyst estimates.
Crop conditions as of Sept. 9 were the worst since 1988, with the harvest about 15 percent complete, the USDA said earlier this week. Since mid-June, futures have surged 54 percent, reaching a record $8.49 a bushel on Aug. 10 on the Chicago Board of Trade. The contract for December delivery fell 0.7 percent yesterday to close at $7.7775.
The larger-than-expected estimate is “a psychological blow to the market,” Randy Mittelstaedt, the director of research for R.J. O’Brien & Associates in Chicago, said before the report. “It’s still a small crop, and that means the market cannot afford to drop prices, or that will stimulate increased demand.”
Smaller supplies of corn may increase costs for ethanol refiners such as Archer Daniels Midland Co. and Valero Energy Corp. and meat producers Tyson Foods Inc. and Smithfield Foods Inc., which buy the grain for feed. Reduced production also may boost demand for fertilizer from CF Industries Holdings Inc., Potash Corp. of Saskatchewan Inc. and Agrium Inc.
Unsold supplies of U.S. corn on Aug. 31, 2013, before next year’s harvest, will total 733 million bushels, compared with 650 million forecast in August and 1.181 billion estimated this year, largely because of larger-than-expected supplies of last year’s crop, the USDA said. Traders surveyed by Bloomberg expected reserves to fall to 596 million bushels, on average.
Feed use of last year’s crop will be 4.4 billion bushels, down 150 million from last month’s estimate, because of this year’s early harvest, which is making more grain available earlier and leaving more of the 2011 harvest in storages as the new marketing year begins, the USDA said. The department also lowered its forecast for exports in the current year by 50 million bushels to 1.25 billion.
Combined Midwest temperatures and precipitation during June and July were the hottest and driest since 1936, according to Joel Widenor, a vice president for Commodity Weather Group LLC in Bethesda, Maryland. About 52 percent of the corn fields in the U.S. were in poor or very poor condition as of Sept. 9, the worst for the date since 1988 when production fell 31 percent from a year earlier, government data show.
Yields will average 122.8 bushels per acre, down from 123.4 estimated in August and less than 147.2 bushels last year, the USDA said. That would be the lowest since 1995. About 87.361 million acres will be harvested, unchanged from August and 83.981 million a year earlier.
The USDA said the average cash price for corn in the marketing year that began Sept. 1 will be $7.90 a bushel, compared with $8.20 estimated a month ago and $6.25 last year.