June 10 (Bloomberg) -- The U.S. corn harvest will be 10 percent smaller than a year ago as Midwest rains lower yields, the U.S. Department of Agriculture said. Inventories are projected to fall to a 13-year low.

Production will fall to 11.735 billion bushels compared with last year's crop of 13.074 billion and the month-ago forecast of 12.125 billion bushels, the department said today in a report. Inventories on Aug. 31, 2009, were forecast at 673 million bushels, the lowest since 1996. Analysts in a Bloomberg survey forecast 728 million bushels. The USDA last month predicted ending stocks of 763 million bushels.

``We need sun,'' said Christian Mayer, a broker and market analyst for Northstar Commodity Investments LLC in Minneapolis. ``The corn needs time to develop a better root system'' to improve yields, he said.

The USDA cut its yield forecast 3.2 percent to 148.9 bushels an acre, down from 153.9 predicted last month and 151.1 for this year's crop.

Corn futures for July delivery rose 6.5 cents, or 1 percent, to $6.5725 a bushel yesterday on the Chicago Board of Trade, after earlier touching a record $6.73. Most-active futures have jumped 72 percent in the past year on surging demand for feed and biofuels, which the government said will cut global inventories before the harvest to a 24-year low.

Smaller inventories may lead to higher costs for hog processor Smithfield Foods Inc. and poultry producer Pilgrim's Pride Corp., which say corn-based animal feed is their biggest expense. Ethanol makers such as Archer Daniels Midland Co. may also see higher expenses.

Reduced Acreage

In a survey released March 30, U.S. farmers said they would sow 86 million acres with corn this year, down from 93.6 million a year earlier, when growers seeded the most since 1944, according to the USDA. The decline, which was spurred partly by rising fertilizer costs and more attractive soybean and wheat prices, would still leave the U.S. with the most corn acreage since 1949.

The USDA on June 30 will update its estimate of planted acreage for each crop.

Cold, wet weather has delayed corn and soybean planting and seed emergence in much of the Midwest, increasing the risk of lower yields and reduced U.S. inventories in 2009, analysts surveyed by Bloomberg said.

About 89 percent of the corn crop had emerged from the ground as of June 8, compared with 98 percent a year earlier, the USDA said yesterday. About 60 percent of the crop was in good or excellent condition, down from 63 percent a week ago and 77 percent last year.

World corn production in the crop year that begins Oct. 1 will total 775.3 million metric tons, down from 789.8 million estimated for this year, the USDA said.

Global consumption is forecast to rise to 793.1 million tons from a record 778.9 million tons this year. Stockpiles in 2009 are forecast to fall to 103.3 million tons.

Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, with soybeans in second place at $26.8 billion, government figures show.

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net.

Last Updated: June 10, 2008 08:30 EDT