Hurt by rain, corn crop to fall short of demand

WASHINGTON (Reuters) - Relentless rain across the U.S. Midwest is cutting into the new U.S. corn crop, which will fail to meet export, biofuel and feed needs, the government said on Tuesday.

Record-high crop prices, meanwhile, will trim pork and chicken production, the Agriculture Department said in its monthly outlook for U.S. and global harvests.

USDA said the corn stockpile will be cut in half, to a three-week supply, by the time the next crop is ready for harvest. The soybean stockpile will shrink to a slender two-week supply before this fall's harvest.

In a monthly report, USDA projected a corn crop of 11.735 billion bushels, down 3 percent due to chilly, rainy weather in May that slowed crop development. The corn yield was pegged for 148.9 bushels an acre, down 5 bushels in one month.

Joe Victor, an analyst with Allendale Inc, said the cut in projected corn yield "only magnifies how much in jeopardy this crop is.

"It's starting off on the wrong foot for 2008," said Victor. It is rare for USDA to make a large adjustment early in the growing season.

Private consultant John Schnittker said that "increasingly short corn and soybean situation is going to affect wheat." If prices zoom, "corn could send wheat off to the races too."

The U.S. wheat crop, in contrast, could be the largest in a decade, at 2.432 billion bushels, said USDA. Soybeans were projected at 3.105 billion bushels, the third-largest ever.

Predictions for a smaller corn crop come as USDA forecasts a jump in U.S. food prices, expected to rise by 5 percent this year, the largest increase since 1990, led by higher prices for bread, cookies, cereal and bakery products. Rising meat prices will drive food-price inflation next year, says USDA.

Since 2005, the season-average farm-gate prices for corn, wheat and soybeans have doubled, due to voracious global appetite for food, the weak U.S. dollar, the biofuels boom and disappointing grain harvests worldwide.

USDA said this year's crops would fetch record prices -- $11.75 a bushel on average for soybeans, $5.80 for corn and $7.50 for wheat.

"Total U.S. meat production for both 2008 and 2009 is projected lower than last month as higher feed prices weigh on the sector," said USDA. It lowered its forecast for pork output in both years and said broiler chicken production would fall in the second half of 2009.

The downturn in corn prospects would translate into smaller exports and less corn used in livestock rations, said USDA. It would be the third-largest U.S. corn crop, but usage would run 775 million bushels larger, so the corn stockpile would drop to 673 million bushels by September 2009.

On June 30, USDA will update its figures for crop plantings. Some analysts expect that 500,000 acres will be switched to soybeans from corn because of planting delays.

In March, farmers indicated they would plant 86 million acres of corn, down 8 percent from 2007, and a near-record 74.8 million acres of soybeans in a balancing act that would rebuild scanty soybean reserves while markets worked through the record 2007 corn crop.

At the trend-setting Chicago Board of Trade, soybean futures prices fell on expectation of larger soybean plantings. At midday, soybeans for delivery in November sold for $14.33 a bushel, down 14 cents. December corn sold for $6.91-1/2, up 6-1/4 cents a bushel. July wheat was up 10-1/2 cents at $7.98 per bushel.

(Reporting by Charles Abbott, editing by Matthew Lewis)