A breakneck start on planting the U.S. corn crop and timely rains in the drought-hit wheat fields of the southern Plains may encourage the USDA to estimate higher-than-average yields, analysts said ahead of the first USDA report to project crops and ending stockpiles for the 2012/13 crop year.
And while this year's outlook for soybeans is likely to be cut for a fifth month in a row due to drought in South America, analysts expect stockpiles to rebound to 65.4 million tons (59.3 million metric tonnes) next year, the highest in two years. The current run of high market prices is likely to encourage farmers to grow a bigger crop in the coming year.
U.S. farm exports may drop slightly because of larger world production, said Agriculture Secretary Tom Vilsack in New York. "But there is still a robust interest in American agriculture products.
USDA's crop projections, with the growing season barely under way, are based on a March survey of U.S. growers' planting intentions and assume normal weather and yields. There is great possibility for change. USDA gives a 16 percent margin of error to its U.S. soybean crop projection and a 26 percent margin for corn.
Although many analysts consider the era of cheap food to be over as appetites grow in powerhouses like China and India even as arable land remain largely stagnant, the huge crops could help tame a three-year cycle of high and volatile food costs.
Persistently low inventories have exacerbated a series of supply shocks that have roiled grain markets over the past two years, from the drought that devastated Russia's 2010 wheat crop to China's run on U.S. corn supplies last year.
This year, soybean prices are the new skyrocket, zooming by more than 25 percent to its highest since 2008 in April.
Larger stockpiles would provide a bigger cushion for any crop damage in the year ahead, a relief for consumers across the globe and for meat companies like Smithfield Foods (>> Smithfield Foods, Inc.) and JBS (>> JBS SA), which have been hurt by high feed costs.
(Reporting by K.T. Arasu, Sam Nelson, Mark Weinraub and Julie Ingwersen; Editing by Marguerita Choy)
By Charles Abbott and K.T. Arasu