The U.S. Department of Agriculture released a bullish crop supply and demand report this morning, slashing U.S. corn yield and production estimate more than expected.
The savage drought gripping the U.S. heartland also caused USDA to drop its soybean yield and production estimate.
The department also cut its world wheat production estimate.
The implications of this crop disaster are higher food prices and a devastating blow to U.S. livestock producers who will face soaring costs to feed their livestock.
Read Also
U.S. livestock: Cattle futures fall on expectations of US agriculture secretary announcement
Chicago | Reuters – Chicago Mercantile Exchange cattle futures fell on investor expectations that U.S. Agriculture Secretary Brooke Rollins might…
The impact will wash into Canada with wheat, barley and canola prices also rising.
However, after opening higher, grain prices are now falling on a forecast for better rain in the Midwest late this week and on profit taking. Markets are also considering how much the higher prices will reduce demand.
At about 11:30 a.m. CST November canola is down from the gains made earlier in the morning. November canola is trading at $622.40, down $8.70 cents from the previous day’s close.
Most grains are down from their highs earlier this morning. Currency fluctuations are also at work this morning, affecting grain prices. Also, the fact that grain prices did not post limit up gains following the USDA report has shifted the market away from bullish optimism and caused some profit taking.
USDA cut its corn yield to 146 bushels per acre, down by 20 bu. from its initial outlook of 166 bu.
Production was cut to 12.97 billion bu., down from 14.79 billion last month.
With production down and prices up, USDA cut its demand outlook.
Feed and residual use was cut by 650 million bu., exports by 300 million bu. and ethanol production was sliced down 100 million bu.
Ending stocks for 2012-13 are pegged at about 1.2 billion bu., down almost 700 bu. from last month’s projection.
USDA estimated soybean production at 3.050 billion bu., down 155 million as increased harvested area is more than offset by reduced yields.
Harvested area, estimated at 75.3 million acres in the June 29 Acreage report, is 2.3 million above the June projection. The soybean yield is projected at 40.5 bu. per acre, down 3.4 bu. from last month.
USDA reduced its outlook for domestic crush and exports, but its ending stocks forecast still fell, to 130 million bushels, down from 140 million last month and 170 million at the end of 2011-12.
USDA pegged world wheat production at 665.33 million tonnes, down from 672.06 last month and 694.69 million last year.
The cut was mostly due to a reduction in Black Sea production to 88.56 million tonnes from 94.76 million last month.
The Black Sea exporting region has suffered several challenges, from bad winter weather to summer heat and drought in some places and excess moisture in others.
