The U.S. Department of Agriculture forecast record global production of wheat and corn as farmers around the world respond to the past year's high grain prices.
The increased output is curbing the sales of U.S. crops abroad, with the USDA on Friday lowering its export forecasts for wheat and soybeans as importers have more countries from which to buy supplies.
The increasing supplies are helping to drive down the cost of food globally. Friday's USDA crop report came a day after the United Nations' food agency said its index of food prices had fallen for the fifth straight month. The index hit a record in February.
"High prices allowed farmers globally to put in more corn, soybeans, wheat—whatever they could," said Mark Schultz, chief analyst with Northstar Commodity, a Minneapolis brokerage.
Exploding demand in emerging markets and the rise of the ethanol industry have driven grain prices to historic highs in recent years. Corn futures, which traded below $3 a bushel for much of the last decade, set a record of nearly $8 a bushel in June.[Since then, the spot price of corn has declined by 25-30%—see below.]
Futures prices for wheat, corn and soybeans at the Chicago Board of Trade all fell on Friday's report. Corn for December delivery settled down 4.5 cents, or 0.8%, to $5.8550 a bushel, while the January soybean contract fell 25.5 cents, or 2.3%, to $11.07 a bushel.
The USDA increased its world wheat production forecast by 0.8% from its November outlook to a record 689 million tons for the current crop year, which runs from April to May. The agency also said global corn production will hit a record of 867.5 million tons, fueled by a 4% rise in the projected Chinese corn crop. The corn crop year runs from September to August.
U.S. grain and soybean prices have pulled back this fall as rising supplies around the world have cut into export demand. That has caused domestic inventories to build back up.
The USDA cut its forecast for U.S. wheat exports by 5% from last month to 925 million bushels and raised its forecast for end-of-season inventories by 6%. The agency also reduced its forecast for U.S. soybean exports to 1.3 billion bushels for the current crop year, a 25-million-bushel drop from its November projection.
Grains prices are unlikely to soar next year as they did in 2011, said Doug Bergman, analyst with RCM Asset Management. He said demand will take some time to rebuild, and farmers won't curtail production as long as they are making profits.
That isn't to say prices wouldn't rise if bad weather, such as a long spell of dryness or excessive rains, significantly damaged crops.
"If we're going to see a big rally, it's going to have to come from the weather," Mr. Bergman said.‹
News 
Market Data 
Discover 
