Corn production in the U.S., the world’s largest grower and exporter, will drop 13 percent to a six-year low after the hottest July since 1936 damaged Midwest fields, the government said.
The harvest will total 10.779 billion bushels (273.8 million metric tons), compared with 12.358 billion in 2011, the U.S. Department of Agriculture said today in its first survey-based estimate for the crop. Last month, the USDA said production would fall to 12.97 billion. The average prediction of 29 analysts questioned by Bloomberg was for 10.929 billion.
Crop conditions on Aug. 5 were the worst since 1988, and 69 percent of the Midwest this week had moderate to exceptional drought, government data show. Corn prices through yesterday had surged 63 percent since mid-June, reaching an all-time high today of $8.49 a bushel on the Chicago Board of Trade. The contract for December delivery erased those gains, closing down 1.8 percent at $8.0925 as of 2 p.m. on demand concerns.
“The U.S. drought means that global corn supplies will be critically tight for the next year,” William Tierney, the chief economist for Chicago-based AgResource Co., said before the report. “Livestock and milk-product prices will have to rise to cover the increased feed costs. Eventually, global consumers will have to pay the bill.”
Dry weather in Russia and below-average monsoon rains in India are also threatening world grain supplies. Goldman Sachs Group Inc. is among the banks forecasting corn prices will keep rising, and the United Nations reported yesterday the biggest gain in global food costs since 2009. World cereal prices surged 17 percent in July, the most since February 2008, the UN’s Food and Agriculture Organization said.
Smaller supplies of corn may increase costs for ethanol refiners such as Archer Daniels Midland Co. and Valero Energy Corp. and meat producers Tyson Foods Inc. and Smithfield Foods Inc., which buy the grain for feed. Cargill Inc. cited lower beef-profit margins as contributing to an 82 percent drop in quarterly earnings.
July’s average temperature, at 77.6 degrees Fahrenheit (25.3 Celsius), was the highest for the contiguous U.S. states since July 1936, and the past year was the warmest 12 months since modern temperature-data collection began 118 years ago, according to the National Climatic Data Center.
About 50 percent of the corn fields in the U.S. were in poor or very poor condition as of Aug. 5, the worst for that date since 1988 when production fell 31 percent from a year earlier, government data show.
“Some crops were written off as unproductive several weeks ago and others are seemingly hanging by a thread,” Roger Elmore, an agronomist at Iowa State University in Ames, said in a report last week. “Some producers are salvaging what remains” for cattle and dairy-cow feed, Elmore said.
Yields will average 123.4 bushels per acre, down from 146 bushels estimated in July and less than 147.2 bushels last year, the USDA said. Yields are forecast to fall to the lowest since 1995.
Unsold supplies of U.S. corn on Aug. 31, 2013, before next year’s harvest, will total 650 million bushels, compared with 1.183 billion forecast in July and 1.021 billion estimated this year, the USDA said. Traders surveyed by Bloomberg expected reserves to fall to 629 million, on average.
World output in the crop year that begins Oct. 1 will be 849.01 million tons, down from 905.23 million forecast a month ago and from 876.84 million last year, the USDA said.
China, the second-biggest producer and consumer, will harvest 200 million tons, up from 195 million estimated in July and up from 192.78 million this year. China’s imports were forecast at 2 million, down from 5 million estimated in July and 5 million this year.
Global consumption is forecast to fall for the first time since 1996 to 861.64 million tons, from 900.51 million tons projected in July and 868.35 million this year.
Worldwide inventories at the end of the next marketing year will be 123.33 million tons, down from 134.09 million predicted a month ago, and 135.97 million expected this year, the USDA said.