The U.S. soybean crop is much bigger than expected, helping to ease a worldwide supply squeeze, thanks to late-season rains that offset the impact of the worst drought in half a century, the U.S. government said Friday.
In an report on crops around the world, the U.S. Agriculture Department raised its forecasts of global soybean, corn and wheat stocks from a month ago.
The world corn crop is the second largest on record despite huge damage in the United States, the No. 1 producer. And notwithstanding the severe drought, U.S. soybean production has pulled to within four per cent of a year ago.
World food prices are near the levels seen in 2008, when food riots broke out in some nations, but they dipped in the past month, says a United Nations food agency.
Fear of a full-blown food crisis has waned as harvests in the Northern Hemisphere proved adequate despite bad weather in the U.S. and Eastern Europe.
Soybean futures prices fell two per cent in Chicago after USDA engineered its biggest ever increase in projected yields in November from October. Wheat futures were down one per cent and corn prices were steady after a volatile morning.
Besides raising its estimate of the U.S. soybean crop by a sharp four per cent from a month ago, USDA increased its corn crop estimate marginally, against expectations, and boosted its forecast for U.S. corn, soybean and wheat stockpiles at the end of this marketing year. Each of the forecasts was higher than traders expected.
USDA pegged the soybean crop at 2.971 billion bushels, three per cent larger than traders expected.
The 111 million-bushel upturn in the crop from a month ago will allow larger exports and make more soybeans available to foodmakers and livestock feeders.
"Late yields were bigger so much bigger than the trade thought and it certainly showed up here. We continue to get a bigger buffer in soybeans than what we imagined in midsummer," said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.
USDA said "several states show the benefit of late-season rainfall" so it raised its national yield estimate by 1.5 bushels per acre.
Estimated at 10.725 billion bushels, the U.S. corn crop was up fractionally from October at a time traders were positioned for a smaller crop. Projected ending stocks, at 648 million bushels, were three per cent larger than traders expected but still the smallest in 17 years, suggesting no room for error with Southern Hemisphere crops and next year's U.S. harvest.
U.S. corn and soybean output will be down for the third year in a row. Soybean usage has shrunk sharply since 2008 -- it will be 10 per cent smaller this year. Corn consumption will be 15 per cent smaller with exports, forecast at 1.15 billion bushels, the smallest since 1974-75.
Beef eaters back away
Sky-high feed prices are cutting into meat production, which ultimately lowers demand for grain.
USDA forecasts a two per cent drop in U.S. meat production in 2013. Americans, on average, will consume 4.4 pounds less of beef, pork and poultry meat next year compared to this year. Half the drop will be in beef consumption, USDA said on Friday.
Livestock groups have called for the Obama administration to relax the requirement to use corn-based ethanol in gasoline. A ruling is possible later this month.
About 40 per cent of the corn crop is used in making the biofuel, diverting billions of bushels away from the livestock industry and corn refiners. An ethanol trade group said on Friday it expects the waiver will be rejected.
The U.S. wheat stockpile was forecast for 704 million bushels at the end of this marketing year, up eight per cent from October and bigger than traders expected.
"I was expecting a tighter carryout in wheat and corn didn't get it," said Roy Huckabay of the Linn Group in Chicago.
Drought remains a threat to U.S. crops. Nearly 60 per cent of the continental United States, including the wheat-growing Plains and the major corn and soybean states, in under moderate to exceptional drought. Timely rains will be vital for good crops in 2013. Winter wheat seeding is almost complete.
Brazil is forecast to displace the United States as the No. 1 soybean grower and exporter this season with a record 81 million-tonne crop, up 22 per cent. Argentina's soybean output is forecast to leap by 25 per cent, to 55 million tonnes.
Australia, the No. 2 wheat exporter in the world, is also struggling with drought. Its wheat crop, at 21 million tonnes, will be down about 30 per cent from a year ago.
World wheat stocks will also be down sharply this year from 2011-12, but USDA said less of the grain will be used for livestock feed so stocks will be a bit larger than it forecast a month ago.
Global soybean stocks were forecast larger by USDA, led by bigger crops in the U.S. and Ukraine.
-- Charles Abbott reports for Reuters from Washington, D.C.