(Updates with government comment starting in third paragraph.)
Feb. 22 (Bloomberg) -- U.S. corn inventories before the 2014 harvest will triple to the highest since 1988 as output jumps to a record following the worst drought in seven decades, the government said.
Stockpiles before next year’s harvest may rise to 2.177 billion bushels from a 17-year low of 632 million projected this year, the U.S. Department of Agriculture said today in a report. Yields may average 163.6 bushels an acre after dropping to 123.4 bushels last year. Production of the grain, the nation’s biggest crop, will rise 35 percent to a record 14.53 billion as consumption increases 16 percent.
“Rising supplies will mean lower feed costs for livestock producers,” Peter Riley, an economist at the USDA’s Farm Serve Agency, said at the annual agricultural outlook forum in Arlington, Virginia.
Corn prices paid to farmers in the 12 months that begins Sept. 1 will average $4.80 a bushel, down from a record $7.20 forecast this year, the USDA said yesterday. An increase in exports and use in domestic grain-based ethanol will be countered by declining gasoline consumption and increasing output in Brazil, Argentina, Ukraine and India, Riley said.
“The world market has changed as high U.S. prices have led to increased exports by other suppliers,” Riley said. “Falling U.S. gasoline consumption will restrain ethanol production. Brazil is shipping more to the U.S.”
Through yesterday, corn futures on the Chicago Board of Trade dropped 19 percent from a record $8.49 on Aug. 10. The contract for May delivery rose 0.7 percent to $6.905 a bushel at 10:02 a.m. The U.S. is the world’s biggest producer.
Record U.S. soybean production of 3.405 billion bushels, up 13 percent from 2012, will double stockpiles before the 2014 harvest to 250 million bushels, up from a nine-year low of 125 million this year, the USDA said. Consumption is forecast to rise 7 percent to 3.295 billion, and yields may increase to 44.5 bushels an acre from 39.6.
“Weather is the key determinate for corn and soybean supplies this year and will be closely watched” through June, July and August, Riley said.
Soybean futures for May delivery rose 0.9 percent to $14.84 a bushel in Chicago. The price headed for the fifth straight increase, the longest rally since April.
U.S. wheat inventories will fall to 639 million bushels before the 2014 harvest from 691 million projected as of June 1, the USDA said. Production may drop 7.4 percent to 2.1 billion this year as yields decline to 45.2 bushels an acre from 46.3 bushels.
“While wheat ending stocks will be modestly lower this year, supplies are not forecast to be tight,” Riley said. “U.S. exports will face increased competition” from Russia, Ukraine and Europe, he said.
Wheat futures for May delivery rose 0.9 percent to $7.305 a bushel. Through yesterday, the price dropped 6.9 percent this year.
The U.S. is the top exporter of corn, soybeans and wheat.
--Editors: Patrick McKiernan, Steve Stroth