Corn Futures Climb on USDA Crop Forecast Cut

The price of corn continues to rise after the USDA unsurprisingly cut the projected corn yield of 166 bushels an acre for 2012 down to 146 bushels an acre.

All of this is related to the ongoing drought conditions plaguing the Midwest, where heat and dry weather has hammered the quality of the grain.

After the report the price of corn jumped 3.2 percent.

The report said this:

"Persistent and extreme June dryness across the central and eastern Corn Belt and extreme late June and early July heat from the central Plains to the Ohio River Valley have substantially lowered yield prospects across most of the major growing regions. Harvested area is also reduced slightly based on the June 29 Acreage report.

Reduced supplies and higher prices are expected to sharply lower 2012/13 corn usage with the biggest reduction for feed and residual disappearance, projected down 650 million bushels. Food, seed, and industrial use is also projected lower, down 105 million bushels, mostly reflecting a 100-million-bushel reduction in corn used to produce ethanol. Exports are projected 300 million bushels lower as tight supplies, higher prices, and strong competition from South American exporters limit U.S. shipments.

A 52-million-bushel increase in beginning stocks and a 15- million-bushel increase in imports offset only a small portion of the expected reduction in this year’s crop. Ending stocks for 2012/13 are projected at 1.2 billion bushels, down 698 million from last month’s projection. The season average 2012/13 farm price for corn is projected at $5.40 to $6.40 per bushel, up sharply from $4.20 to $5.00 per bushel in June. "

Soybeans and wheat continue to be pulled up by the price movement of corn, with soybeans rising just under 2 percent and wheat futures increasing by 2.36 percent.