Nov. 4 (Bloomberg) -- Wet Midwest weather and a freeze in October reduced the size of the U.S. corn crop while soybean output may reach a record, said Loyd Brown, who runs a company that manages 480,000 acres of farmland in eight states.

“The early freeze took the top end off corn yields and we had unfavorable harvest weather most of October,” said Brown, the president of Hertz Farm Management Inc. in Nevada, Iowa. “Bean yields are coming in about average or a little above,” Brown said yesterday in an interview.

Corn and soybeans are being collected at the slowest pace since at least 1986, when the government began tracking harvest progress. About 49 percent of the soybeans and 75 percent of the corn remained to be gathered as of Nov. 1. Much of the Midwest received more than four times the normal rainfall last month, leaving fields too muddy for heavy farm machinery. Freezing weather in early October halted development in some crops.

Corn futures in Chicago surged 22 percent last month, partly on speculation that harvest delays would result in a smaller crop. Soybeans, which can be collected earlier than corn, gained 5.3 percent.

The U.S. Department of Agriculture last month forecast corn output at 13.018 billion bushels, up 7.6 percent from last year and the second-biggest ever. Yields will average a record 164.2 bushels an acre, up from 153.9 bushels last year, the department said.

The soybean crop was projected at a record 3.25 billion bushels, 9.5 percent bigger than last year, with yields averaging 42.4 bushels an acre, up from 39.7 bushels per acre. The forecasts will be updated on Nov. 10.

Stunted Development

Brown said heavy rains in April and May caused much of the corn crop to be planted later than normal, stunting plant development. Cool weather and a lack of sunshine from June to September further delayed maturity and reduced the amount of sugars and starches in kernels to below the normal level of 56 pounds per bushel, he said.

The corn harvest may be further delayed because much of the crop has accumulated too much moisture and must be dried before it can be stored or shipped, and there is limited drying capacity in many areas, Brown said. The moisture standard for corn is 15.5 percent.

“There is more corn with moisture greater than 25 percent than I have seen” in 40 years of farm management, the 62-year-old Brown said. “If you had to make a bet on what the USDA report next week will say, I would bet on a smaller corn crop.”

Optimism on Soybeans

“If we can get one good week of weather, we can get most of the soybean crop harvested,” reducing the threat of losses. “I don’t think we have lost many bushels.”

The outlook for next year’s crops has improved with fertilizer costs down about 50 percent from a last year, Brown said. The value of high-quality farmland has regained about half of the 10 percent to 15 percent drop from its peak in the June-to-August period in 2008, he said.

Grain and oilseed farmers may see higher incomes next year with 2010 December corn futures trading over $4 a bushel and harvest-delivery soybeans around $10, Brown said.

“The good news is fertilizer costs are falling,” he said. “The market for good-quality land is strengthening again” because of rising global food demand and finite supplies of real estate, he said. Investors are looking at “long-term returns of 3 percent to 4 percent,” Brown said.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net

Last Updated: November 4, 2009 11:04 EST