October 11, 2010

US corn production forecast drops due to adverse weather

US corn crop estimates will be 3.8% smaller than forecast a month ago, the government said, after flooding in June and hot, dry weather in August cut Midwest yields.

Production will total 12.664 billion bushels, down from 13.16 billion projected a month ago and less than last year's record 13.11 billion, the US Department of Agriculture said.

"We will not produce enough to meet demand from domestic livestock producers, ethanol makers and overseas buyers," Alan Brugler, the president of Brugler Marketing & Management Inc. in Omaha, Nebraska, said. "We are going to run up the price to slow demand and encourage farmers to plant more next year," he said.

The report was released before the start of trading on CBOT, where corn futures for December delivery rose US$0.098, or 2%, to US$4.983 a bushel yesterday. The most-active contract has surged 41% since June 1 as adverse weather damaged crops.

Reduced supplies of corn may increase expenses for meat companies such as Tyson Foods and Smithfield Foods.

Parts of the Midwest received the most rain in June since 1960, damaging root development and yield potential, said Mike Tannura, the president of T-Storm Weather LLC in Chicago. In July and August, temperatures in Iowa, Illinois, and Indiana were the fifth-warmest since 1960, restricting movement of sugars and starch into kernels, he said.

The USDA cut its yield forecast to 155.8 bushels per acre from 162.5 bushels estimated last month. Last year's average yield was a record 164.7 bushels and analysts were expecting 160.2 bushels, on average.

Farmers will harvest 81.263 million acres this year, the USDA predicted, up from 81.005 million estimated a month ago.

The USDA said 88.2 million acres were planted with corn, up from a June estimate of 87.872 million and more than 86.482 million sown a year earlier. For the October production report, the department incorporates acreage figures from its Farm Service Agency, which gathers data from farmers at the county level.