Corn price drops; drought damage less than thought
CHICAGO -- Corn output in the United States, the world's largest grower, will fall by less than analysts expected after the worst drought in more than 50 years, the government said Wednesday.
Farmers will collect 10.727 billion bushels, the smallest crop in six years and down 13 percent from 12.358 billion in 2011, the U.S. Department of Agriculture said in its second survey-based estimate for the crop. Last month, the USDA forecast 10.779 billion. The average prediction of 35 analysts surveyed by Bloomberg was for 10.420 billion. 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, USDA data show.
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 and Valero Energy and meat producers Tyson Foods and Smithfield Foods, 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.
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.