Record-large U.S. corn and soybean crops will end three years of punishingly tight domestic supplies, the government said on Friday in a report that offered the brightest outlook in years for world food supplies.
One year after a brutal Midwest drought revived fears of grain shortages and higher prices, the U.S. Agriculture Department projected the largest-ever global wheat, corn, rice and oilseed crops in its first projections for the 2013/14 crop year. Global grain stocks would rise more than analysts expected, with corn zooming 23 percent to a 13-year high, it said.
The forecasts tipped Chicago grain prices lower, but losses were limited by concerns that conditions may change dramatically in the five months before the crops are in the bin. July weather conditions are critical for U.S. crops. A cold, rainy and snowy spring has farmers weeks behind in sowing corn.
"Overall, we're looking at a monster of a crop going in. But it doesn't mean anything right now because we don't know what the weather is going to be," said Joe Vaclavik of Standard Grain.
If the forecasts are realized, however, they could help quell a succession of food-price spikes and supply fears triggered by extreme weather conditions, strong Chinese demand and an influx of investor funds into commodities.
Corn prices fell 1 percent to close at $6.92 a bushel on Friday, double the price for much of 2010 but off a record above $8 last summer. Wheat fell 3 percent to close near its lowest price in a year.
RECORD U.S. CORN CROP DESPITE LATE START
In its first projection of the fall harvest, USDA said the corn crop would be a record 14.14 billion bushels, despite a late start to planting that will lower yields.
All the same, corn ending stocks for the 2013/14 marketing year would hit 2.004 billion bushels, the largest supply in nine years and marginally larger than traders expected. It would nearly triple the 759 million bushels, the smallest supply in 16 years, forecast for the Aug. 31 end of this marketing year.
"The slow start to this year's planting and the likelihood that progress by mid-May will remain well behind the 10-year average reduce prospects for yields," said USDA. It pegged yields at 158 bushels an acre, down 5.6 bushels, or 3 percent, from a projection made at its Outlook Forum in February.
With the mammoth crop, 4.85 billion bushels of corn will be used to make ethanol, up from 4.6 billion bushels from the 2012 crop. Ethanol output could top 13.4 billion gallons from this year's crop.
U.S. soybean production was projected at a record 3.390 billion bushels - enough to recapture the title of world's largest soybean grower from Brazil - with 2013/14 end stocks more than doubling to 265 million bushels from the 125 million estimated for this Aug 31. Traders on average had expected stocks of 236 million bushels. Stocks would be the largest in seven years.
CROP PRODUCTION SURGES WORLDWIDE
Bigger wheat crops are projected in all of the world's major exporting nations, with a record 701.1 million tonnes expected, up 7 percent. Europe and the former Soviet states would see the largest increases, said USDA. Ending stocks would rise by 3 percent.
Europe, the former Soviet states and China would reap larger corn crops, along with the record U.S. crop, for a world record 965.9 million tonnes, up 13 percent from 2012/13. Even with record consumption, stocks would reach a 13-year high of 154.6 million tonnes, USDA projected.
China was forecast to become the world's largest rice importer in 2013/14 as world production rises 2 percent to a record 479.3 million tonnes, said USDA, and ending stocks of 107.8 million tonnes would be the largest since 2001/02.
"China's annual (rice) consumption needs have overtaken production since 2012/13," said USDA, forecasting imports of 3 million tonnes in the new marketing year.
Global oilseed production was projected for a record 491.3 million tonnes, up 4.7 percent due mainly to a larger soybean crop. Soybeans, which account for roughly 60 percent of world oilseeds, would be up by 6 percent. Soybean ending stocks would surge by 20 percent, to 75 million tonnes, USDA said.
The world's largest soybean importer, China was forecast to buy 69 million tonnes, up 10 million tonnes from this marketing year and two-thirds of the world total. Chinese farmers are shifting land to more profitable crops and growing fewer soybeans. "If realized, harvest area of 6.6 million hectares would be down 28 percent in four years," said USDA.
U.S. CROP PLANTING SLOWED BY COLD SPRING
A cold, rainy, snowy spring has slowed fieldwork dramatically. At the start of this week, only 12 percent of the corn crop was planted, the smallest tally for early May in three decades. Soybean, cotton and rice plantings also lagged. Dry weather was expected to allow planting to surge this weekend.
The U.S. winter wheat crop was forecast at 1.49 billion bushels, down 10 percent from last year, mostly due to freeze and drought damage in the central and southern Plains, the heart of the crop. The decline was slightly more than traders expected.
Winter wheat, the lion's share of U.S. output, is projected to be 2.057 billion bushels this year.
Cotton growers saw a record yield of 887 lbs per acre on the 2012 crop that totaled 17.3 million bales, USDA said in a final estimate of the crop. The upcoming crop was projected to fall to 14 million bales on smaller plantings.
USDA said there was a 12 percent margin of error for its winter wheat estimate, which was based on spot checks of fields and a survey of 13,000 growers. Its May projection for corn production has a 28 percent margin of error and soybeans have a 16 percent margin of error, it said. (Reporting by Charles Abbott; Editing by Phil Berlowitz)