11 July 2012 16:21 [Source: ICIS news]
HOUSTON (ICIS)--US corn and soybean prices moved higher on Wednesday after the US Department of Agriculture (USDA) slashed the projected yields of this year's crops because of continuing drought.
The USDA trimmed its projected yield of the 2012 US corn crop by 12% to a national average of 146 bushels/acre in its monthly World Agriculture Supply and Demand Estimates (WASDE), down 20 bushels/acre from the June estimate.
Citing a rapid decline in crop conditions, USDA also dropped the soybean yield estimates to 40.5 bushels/acre, down 3.4 bushels/acre from last month's estimates.
Commodity traders at the Chicago Mercantile Exchange pushed the price of December corn futures up to $7.37/bushel in early trading.
Corn futures contracts are trading more than 30% higher than a month earlier.
November soybean futures opened higher at $15.71/bushel.
Wide-spread drought across the midwest, central plains and midsouth continues to punish crops, prompting some farmers in states such as Iowa, Illinois and Indiana to cut down their corn crop and collect crop insurance, which can pay as much as 80% of a crop's projected value depending on the policy.
USDA now projects a harvest of 12.97bn bushels, 12% less than a month ago, but still the third largest on record.
USDA reduced by 100m bushels, or 2%, its forecast of corn used for ethanol.
In the US, each bushel of corn on average yields 2.8 gal (10.6 litres) of ethanol.
US soybean oil provides about 50% of the feedstock for the domestic production of biodiesel. One bushel of soybeans yields enough oil to produce 1.5 gal of biodiesel.
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