* World wheat, corn, soy crops down slightly, rice up-USDA
* Corn futures dive to 7-week low after report, wheat down
* Drought cuts Russia's wheat crop 9 pct, Kazakhstan's wheat
crop 4.5 pct
* Soybean futures jump 2 pct; forecast cut more than
By Charles Abbott
WASHINGTON, Sept 12 Searing droughts in the
United States and Russia will deplete harvests of wheat, corn
and soybeans, the U.S. government said on Wednesday, but global
food supplies were not hurt as badly as many had feared.
With the U.S. harvest off to a fast start, the Agriculture
Department said the country's corn crop would be the smallest in
six years and the soybean crop would be the smallest in nine
years. But even though USDA lowered its crop estimates for the
United States and Russia, they are bigger than expected.
USDA's estimates of the corn and soybean stockpiles at the
end of this marketing year were also larger than traders
expected. One factor: high corn prices have prompted cutbacks in
livestock production, reducing demand for feed and keeping more
corn in stockpiles.
The USDA's World Agricultural Supply and Demand Estimates
report will guide the Group of 20 wealthiest nations as it
decides whether joint action is needed to prevent a repeat of
the 2008 food price spike that left tens of millions of people
hungry and sparked food riots in some countries.
The report eased worries about severe shortages and brought
down prices of some U.S. agricultural futures. Corn futures on
the Chicago Board of Trade fell to a seven-week low and wheat
fell too on the prospect of larger supplies.
"Corn prices likely have peaked," said agricultural
economist Darrel Good at the University of Illinois, unless a
quarterly report due Sept 28,shows the corn stockpile is too
But soybean futures surged more than 2 percent on USDA's
forecast of tight supplies. Soybeans were on track to test the
record price set last week. Good said high prices are needed to
stretch the crop through the marketing year.
USDA lowered its forecast of the corn crop by less than 1
percent and the soybean crop by 2 percent. Traders had expected
a 3.7 percent reduction in corn and a 1 percent cut in soybeans.
THIRD SHORT U.S. CORN CROP BRINGS HUGE CUT IN USE
This is the third disappointing corn crop in a row, with
production down by 18 percent from 2009's record crop. Corn use
by exporters, ethanol plants and livestock feeders will drop by
9 percent this marketing year because of the short crop, USDA
said, on top of a 5.5 percent contraction last year.
At the end of this marketing year, U.S. grain bins will hold
a scanty 3-1/2 week supply of corn when the carryover commonly
used to be six or eight weeks. The soybean stockpile will be
thinner still -- barely more than a two-week supply.
"Soybeans still have a little bit of a chance to improve,"
USDA chief economist Joe Glauber told the USDA radio service,
noting yields are up in the U.S. Southeast. The soybean harvest
is just beginning.
Drought also damaged wheat crops in Russia and some of its
neighbors. Russia's crop was 39 million tonnes, down 9 percent
from the August estimate and the second large cut in a row.
Kazakhstan's crop was reduced 4.5 percent by USDA.
World wheat supplies are only marginally lower despite the
losses, USDA said, and feed grain production also is down less
than 1 percent, compared with August forecasts. The world wheat
crop is down 5 percent from last year and coarse grains down 2.4
World rice production is on par with last year. The U.S.
rice crop is 6 percent larger than last year, USDA said. It
boosted the rice forecast 3 percent despite concern about
hurricane damage in late August.
HIGH GRAIN PRICES DISCOURAGE MEAT PRODUCTION
Record-high corn prices discouraged livestock feeding this
summer, so more corn will be available in the marketing year
that opened Sept. 1. USDA said some of the corn would be used as
feed this year but some will go into reserves, padding U.S.
supplies, because of continued high prices.
Meat production will fall this year and in 2013 as farmers
grapple with higher feed prices. Hog producers will sell animals
at lighter weights rather than pay to fatten them further, said
USDA. Overall, the per capita meat supply would drop by 3
percent in two years.
Livestock producers have petitioned the Obama administration
to waive the federal requirement to use corn-based ethanol in
gasoline. They say devoting a large percentage of the corn crop
to ethanol production makes livestock feed less affordable. A
decision is likely in mid-November.
Analyst Mark McMinimy of Guggenheim Partners said "we
continue to believe that a waiver denial is the likely outcome."
With its corn forecast stabilizing, USDA's crop report does not
aid the drive for relaxing the ethanol mandate, he said.
The early and fast-moving corn harvest -- 15 percent of the
crop already is in the bin -- boosted corn supplies at the start
of September, traditionally the low point. USDA said 1.2 billion
bushels of new-crop corn was harvested before Sept. 1, up to 700
million bushels more than a year ago.
"Early new-crop use is expected to displace use of 2011
old-crop corn and boost old-crop inventories on Sept 1," USDA
By airing the early-harvest figure, USDA removed some of the
drama from the Sept 28 Grain Stocks report, said Dan Cekander of
"That was a fear, that the (corn) stocks number may come in
high. And USDA addressed that issue in this report," said
Cekander. "When you use the new crop immediately, as they were
using it, it was clearly displacing old crop during August."