By Alan Bjerga
Aug. 12 (Bloomberg) -- Corn and soybean crops in the U.S., the world's largest producer, avoided the damage investors anticipated in June from the worst flooding in 15 years as ``ideal'' weather helped plants recover, the government said.
The corn crop will be the second-biggest ever and the soybean harvest will be the fourth-largest, the U.S. Department of Agriculture said today in a report. Cash prices for both commodities will be lower than forecast last month, the USDA said, helping to keep food inflation in check.
The USDA's forecast for higher corn yields ``was a surprise and suggests the crops were never as bad as people thought back in the middle of the June flooding,'' said Chad Henderson, a market analyst for Prime Agricultural Consultants in Brookfield, Wisconsin. ``Both corn and soybeans will need an extended growing season'' to reach full potential, he said.
The floods sent crop prices surging, fueling concerns food prices would soar. Corn reached a record in late June, more than doubling from a year earlier, and soybeans touched an all- time high of $16.3675 a bushel on July 3, jumping 92 percent in 12 months. Since then, both commodities have plunged.
The USDA predicted a corn crop of 12.288 billion bushels, based partly on surveys of farmers in flood-affected states during July and August, after the waters receded. That's up 4.9 percent from last month's forecast. The soybean harvest will total 2.973 billion bushels, the USDA said, down just 0.1 percent from the month-ago projection.
Corn, Soybean Futures
Corn yields will rise to 155 bushels an acre, 4.4 percent more than estimated in July, the department said.
The corn-crop forecast is a ``negative number for the market,'' said Greg Grow, director of agribusiness for Archer Financial Services in Chicago. ``Buyers will wait for lower prices closer to harvest before increasing coverage.''
Corn futures for December delivery rose 2.5 cents, or 0.5 percent, to $5.195 a bushel at 12:04 p.m. on the Chicago Board of Trade, after earlier falling as much as 2.4 percent. Before today, the most-active contract had dropped 35 percent from the record high of $7.9925 a bushel on expectations that the flood damage was not as bad as first thought.
Soybean futures for November delivery rose 13.5 cents, or 1.1 percent, to $12.095 a bushel in Chicago. Yesterday, the price at one point touched $11.68, the lowest since April 1. The most-active contract before today had dropped 27 percent since reaching the record.
Cash Prices
The USDA reduced its estimates for cash prices for both crops in the marketing year that starts Sept. 1. Corn will average $5.40 a bushel, down from $6 projected in July, while soybeans will sell for about $12.25 a bushel, down from the month-ago estimate of $12.75.
The June floods killed at least 24 people and inundated more than 3.4 million acres. Crops were destroyed in waterlogged fields, threatening to increase food prices already forecast by the USDA to rise as much as 5.5 percent this year, the most since 1989.
A bigger crop should stabilize corn prices and ease inflation pressure on grain- and oilseed-based food products, USDA Chief Economist Joe Glauber said today in an interview. Unlike some past floods, such as the 1993 Midwest deluge most often compared with this year's, farmers had a chance to replant crops with assistance from the weather.
``With wet weather or late planting, sometimes the root system isn't fully developed, so that you really need timely rains'' combined with land that's drying out from overflows, he said. ``The plant population looks pretty good.''
Skeptical Analysts
Some analysts said USDA's yield projection for corn is high and the government may be underestimating the residual damage caused by the June floods, especially in Iowa.
``The thing that surprised me was the fact they increased harvested acres as a percentage of planted acres,'' said Tomm Pfitzenmaier, a partner at Summit Commodity Brokerage in Des Moines, Iowa. ``I talk to people who tell me about how bad their drowned-out stalks are everyday.''
On June 22, during the height of flooding, the USDA said 59 percent of the corn crop was in good or excellent condition, down from 73 percent at the same time in 2007. For soybeans, it was 57 percent, compared with 66 percent. The USDA yesterday said 67 percent of corn was in good or excellent condition and 63 percent of soybeans, compared with 56 percent for both at the same time last year.
``Abundant rainfall and near- to below-normal temperatures provided nearly ideal conditions for Midwestern corn and soybeans,'' the USDA said in today's report. The department's estimates were made after surveying about 11,000 farmers in Illinois, Indiana, Iowa, Minnesota, Missouri and Wisconsin during July and August.
To contact the reporters on this story: Alan Bjerga in Washington at abjerga@bloomberg.net;
Last Updated: August 12, 2008 13:06 EDT
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