* Record US soybean crop, corn is No. 3 as yields fall
* USDA corn, soy forecasts are below trade estimates
* Corn, soy, wheat futures close "limit up"
* Livestock futures, fertilizer shares rise on USDA news
(Updates with closing CBOT prices, more analyst comment)
By Charles Abbott
WASHINGTON, Oct 8 The U.S. corn crop is likely
to be far smaller than expected as late summer heat reduced
yields across the Corn Belt, and the corn stockpile will shrink
to less than a four-week supply by next fall, a government
report said on Friday.
The U.S. Agriculture Department shocked market watchers,
cutting its corn crop estimate 4 percent and soybeans 2 percent
based on conditions Oct. 1. Its forecast of crop size and
season-ending stocks sent grain prices soaring in Chicago.
"Smaller crops get smaller in both corn and soybeans," said
Don Roose, president of U.S. Commodities in West Des Moines,
Iowa. "Soybeans have lost their cushion. South America is going
to be most important."
With the harvest in full swing, USDA reported a downturn in
corn yields from Ohio to Nebraska. It pegged the average yield
at 155.8 bushels per acre, down 4 percent from its prior
estimate. USDA cut yields by 14 bushels an acre in Illinois,
the No. 2 corn state; by 10 bushels an acre in Iowa, the No. 1
state; and by 9 bushels in Nebraska, the No. 3 state.
Hot weather in August prevented corn and soybeans from
reaching peak yields, traders said. Mid-September rains slowed
the harvest in the Upper Midwest.
On the Chicago Board of Trade, prices of corn, wheat and
soybeans all rose by the maximum amount allowed in a day.
Livestock and ethanol prices also rose, as did shares of
USDA lowered its estimate of yields by 4 percent and pegged
the corn crop at 12.664 billion bushels. With high demand, the
corn surplus will shrink to 902 million bushels by the end of
this marketing year, the smallest since 883 million bushels in
1996/97. The stocks-to-use ratio would be a tight 6.7 percent.
Traders had expected a corn estimate of 12.96 billion
bushels and ending stocks of 1.172 billion bushels. For
soybeans, they expected a crop of 3.475 billion bushels and end
stocks of 331 million bushels instead of USDA's estimate of a
3.408 billion-bushel crop and 265 million bushel carry-out.
USDA's estimate of wheat end stocks, 853 million bushels,
was 2 percent lower than traders expected.
The average U.S. soybean yield was estimated at a record
44.4 bushels an acre, although down 0.3 bushels from a month
Private consultant John Schnittker said USDA's steep
reduction in corn yields "is almost unprecedented" and added
that the stocks to use ratio "is pretty low, putting real
pressure on acreage and yield next year."
The projected corn crop would still be the third-largest on
record, and the soybean crop would be the biggest on record.
Ethanol makers and corn growers said corn supplies will be
adequate, although smaller.
At the CBOT, it was the first time since Aug 13, 2008 that
corn, wheat and soybeans all settled limit up.
Corn for December delivery settled at $5.28-1/4 a bushel,
up 6 percent. December soybeans were $11.35 a bushel, up 6.6
percent, and December wheat, at $7.19-1/4, was up 9 percent.
Futures prices also soared in Europe.
Corn could top $6 a bushel next week, said analyst Shawn
McCambridge of Prudential Bache Commodities in Chicago.
U.S. live cattle and hog futures surged as an inducement to
producers to fatten livestock in the face of rising feed
Fertilizer shares also rose, with analyst Edlain Rodriguez
of Broadpoint Glecher saying farmers will need nutrients to
boost production. Bids for cash ethanol jumped 12 cents a
gallon but there were no offers. Corn is the main feedstock for
U.S. fuel ethanol.
The Obama administration says it will decide in early
October whether to allow a 15 percent blend of ethanol in
gasoline for late-model cars, up from 10 percent.
It was the second market-stirring report by USDA in a week.
On Sept 30, USDA said there were 1.708 billion bushels in
reserve as this year's harvest began, far more than expected.
That report ended a rally and knocked corn prices below $5 a
bushel for a week.
(Reporting by Charles Abbott, Roberta Rampton, Christopher
Doering and Emily Stephenson; Editing by David Gregorio)