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Published November 11, 2008, 12:00 AM

USDA projects lower corn, soybean harvests

The Agriculture Department on Monday lowered its forecasts for this year’s U.S. corn and soybean harvests, pushing up the prices of both commodities while knocking down the shares of meat producers.

By: Christopher S. Rugaber, The Jamestown Sun

The Associated Press

WASHINGTON — The Agriculture Department on Monday lowered its forecasts for this year’s U.S. corn and soybean harvests, pushing up the prices of both commodities while knocking down the shares of meat producers.

Chicken, pork and beef companies such as Smithfield Foods Inc., Tyson Foods Inc. and Hormel Foods Corp. use corn and soybeans for livestock feed. Tyson said Monday its chicken unit lost $91 million in its most recent quarter due to a $230 million increase in grain costs.

While changes to the USDA’s estimates were small, they defied analysts’ expectations.

The USDA said corn production is expected to be 12.02 billion bushels, down from last month’s revised estimate of 12.03 billion and below analysts’ estimates of 12.08 billion.

Corn yield per acre is expected to be 153.8 bushels. Analysts expected the yield to be 154.4 bushels.

The lower yield and production “caught the market off-guard,” said Joe Victor, vice president for marketing at Allendale Inc., a commodities broker based in McHenry, Ill.

In North Dakota, the latest forecast projects the state’s corn production at 285 million bushels, down 2 percent from October’s projection but still a record and 5 percent more than last year. The state’s soybean forecast is down 6 percent from October, to 108 million bushels.

The USDA estimated North Dakota’s dry edible pea production at 7.9 million hundredweight, down 24 percent from last year. The report said the average yield is estimated at 1,580 pounds per harvested acre compared with 2,080 pounds last year.

The state’s lentil production is estimated at 828,000 hundredweight, down from 1.34 million hundredweight last year, due to a drop in harvested acres. Fall potato production also is down — estimated at 22.7 million hundredweight compared with 23.7 million hundredweight last year. The USDA said the harvested fall potato acres are down 10,000 from last year, to an estimated 81,000 acres.

Corn and soybean futures prices rose in response to the report. Corn for December delivery increased 8 cents to $3.84 per bushel, according to the CME Group’s Chicago Board of Trade.

Soybeans for January jumped 27 cents to settle at $9.48.

Analysts said China’s announcement of a $586 billion stimulus package over the weekend also contributed to higher prices, on the basis that the package may boost demand for commodities by maintaining that country’s economic growth.

China also is building reserves of soybeans for its livestock producers, said Lynn Smith, a futures broker at the Zaner Group in Chicago. “Demand (for soybeans) is expected to continue to be strong,” he said.

The soybean harvest is forecast to be 2.92 billion bushels, down from 2.94 billion, according to the USDA’s November report. The new projection matched analysts’ estimates.

Soybean yield per acre is forecast to be 39.3 bushels, down from 39.5 last month.

Shares of several meat companies fell on the news, amid a broader market decline, while the chicken industry seems to be hurting the most.

Shares of Tyson, the world’s largest meat producer, dropped 77 cents, or 10.3 percent, to $6.69. The company reported a fourth-quarter profit Monday, and while it boosted net earnings by 50 percent, its chicken unit struggled from higher oil and grain costs.

Shares of the nation’s largest chicken producer, Pilgrim’s Pride Corp., fell 16 cents, or 19.1 percent, to 68 cents. The company said Monday it has hired a restructuring officer as it struggles to extend its credit agreements. Pilgrim’s Pride also has said it expects a “significant loss” in the fourth quarter partly due to high feed costs.

Pork producer Smithfield dropped 86 cents, or 8.6 percent, to $9.18, while Sanderson Farms Inc., a chicken producer, fell 67 cents to $24.49.

Despite the reduced harvest forecasts, the department said it expects world corn supplies to increase while the global use of corn as feed falls this year. The USDA lowered its estimate of the average price of corn for the year to a range of $4 to $4.80 per bushel, down from $4.25 to $5.25 per bushel last month.

But that’s still above current futures prices, Victor noted.

Separately, Deutsche Bank analyst Christina McGlone wrote in a note to clients that the USDA’s report is “mildly negative” for grain processor Archer-Daniels-Midland Co., which makes soybean oil, ethanol and other agricultural products.

Corn and soybean prices have dropped from their record highs this summer. Corn reached $8 a bushel and soybeans $16 a bushel in the aftermath of the Midwest floods in June.

This year’s corn crop is still expected to be the second largest ever, behind last year’s record haul. The soybean crop is expected to be the fourth largest ever.

Monday’s report comes as 86 percent of this year’s soybeans, and 55 percent of the corn, have been harvested, the USDA said. That makes the projections more accurate than previous months.

The corn harvest is significantly behind its average pace, the USDA said, due to planting delays in the spring and cooler than average temperatures during the growing season.

AP Food Industry Writer Emily Fredrix contributed to this report from Milwaukee.

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