WASHINGTON, D.C. (Reuters) – The U.S. corn crop is likely to be far smaller than expected as late summer heat reduced yields across the corn belt, a government report said Oct. 8.
As a result, the corn stockpile will shrink to less than a four-week supply by next fall.
In a shock to markets, the U.S. Department of Agriculture cut its estimate of the corn crop by four percent and soybeans by two percent based on conditions Oct. 1.
Its forecast of crop size and a bare-bones level of season-ending stocks were well below analysts’ expectations and sent grain prices soaring in Chicago.
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“Smaller crops get smaller in both corn and soybeans,” said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.
“Soybeans have lost their cushion. South America is going to be most important.”
Futures prices soared, including Canadian canola, and U.S. live cattle and hog futures surged as an inducement to producers to fatten livestock for slaughter in the face of rising feed prices. However, feeder cattle futures fell as feedlot demand will slow.
Fertilizer shares rose, with analyst Edlain Rodriguez of Broadpoint Glecher saying farmers will need nutrients to expand corn production.
Potash Corp. stocks were about two percent higher, Agrium and Mosaic Co. were up nearly six percent and CF Industries was up eight percent.
Bids for cash ethanol jumped by 12 cents a gallon in response to the smaller corn crop.
U.S. president Barack Obama’s administration says it will decide in early October whether to allow a 15 percent blend of ethanol in gasoline for late-model cars. The standard blend is 10 percent.
After lowering its estimate of yields by four percent to 155.8 bushels per acre, the USDA pegged the corn crop at 12.664 billion bu.
With high demand from feeders, processors and exporters, the corn surplus will shrink to 902 million bu., or 22.9 million tonnes, by the end of this marketing year, the smallest reserve since 883 million bu. in 1996-97.
The stocks-to-use ratio would be a tight 6.7 percent.
Despite the slump, the corn crop would be the third largest on record. The soybean crop would still be the biggest on record.
The USDA also cut world wheat year end stocks to 174.66 million tonnes, down 1.8 percent from 177.79 million estimated last month and less than what analysts expected.
Hot weather in August prevented corn and soybeans from reaching peak yields, traders said. Mid-September rain slowed the harvest in the upper Midwest.
Traders had expected a corn estimate of 12.96 billion bu. and ending stocks of 1.172 billion bu. For soybeans, they expected a crop of 3.475 billion bu. and ending stocks of 331 million bu. instead of the USDA’s estimate of a 3.408 billion bu. crop and 265 million bu. carryout.
The USDA’s estimate of U.S. wheat end stocks at 853 million bu. was two percent lower than traders expected.
