Corn futures rebounded in Chicago and soybeans posted the biggest gain in 13 months after the U.S. Department of Agriculture said unusually heavy rains will mean smaller harvests than the records forecast last month.
U.S. farmers, the world’s largest corn growers, will collect 13.763 billion bushels, less than the 13.95 billion forecast in July and below the 14.036 billion forecast by analysts in a Bloomberg survey, a USDA report today showed. The department predicted soybean output will be 3.255 billion bushels, down from 3.42 billion expected last month and 3.357 billion forecast by analysts.
Prices for both crops slid into bear markets this year, reducing costs for buyers including Archer-Daniels-Midland Co. and Tyson Foods Inc., on expectations that record harvests would bolster global inventories eroded by a U.S. drought in 2012. Heavy rains in the Midwest during May and June delayed corn and soybean planting, and cool, dry weather during the past month slowed crop development.
“Cool weather in July hurt yield potential more than expected, and now the markets are adding a weather-risk premium,” said Dale Durchholz, the senior market analyst for AgriVisor LLC in Bloomington, Illinois. “The smaller U.S. corn and soybean crops were a surprise and will increase the importance for an extended growing season.”
Corn futures for December delivery rose 2.4% to close at $4.64 a bushel at 1:15 p.m. on the Chicago Board of Trade, the biggest advance since July 9. Before the USDA report, corn reached $4.465, the lowest for a most-active contract since September 2010. Prices have tumbled 43% in the past 12 months.
Soybean futures for November delivery rallied 3.6% to $12.2525 a bushel on the CBOT, the biggest gain for a most- active contract since June 2012. The price touched $11.625 on Aug. 7, the lowest in 18 months.
Even with reduced yield prospects, domestic corn output will be a record, reducing average cash prices to $4.90, down 30% from $6.95 forecast in the year that ends Aug. 31, the USDA said. Cash-soybean prices may average $11.35, down 21% from $14.40 forecast this year, as U.S. production jumps 8% to the second-highest ever, the agency said.
World corn production this year will rise 12% to 957.1 million metric tons from 858.8 million last year, the USDA said. Reserve inventories before the 2014 harvest will jump 22% to 150.17 million, from 123.11 million estimated on Oct. 1 this year, the biggest jump in nine years. World soybean inventories next year will rise 16% to a record 72.27 million tons, the government forecast.
“There is still a burdensome supply of grain developing this year,” Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa, said in a telephone interview. “Rallies may be limited because U.S. supplies will need to stay competitive to boost demand.”