THE INTERNATIONAL grains industry was expecting some sort of a drop in US corn production forecasts in the latest US Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) report, but the extent of cut has shocked many.
The extent of the production cuts was borne out by the fact the USDA is now forecasting the smallest US corn crop for some four years as a result of the saturated late spring / early summer which will mean farmers cannot get corn planted in a timely manner.
Corn futures on the Chicago exchange rose by 2-3 per cent across the near contracts, with the July contract now as US427 cents a bushel.
US wheat futures were dragged along in the slipstream in spite of slightly bearish news in relation to good wheat prospects in countries such as India and Ukraine, Chicago July wheat futures were up 14c/bu to 517c/bu.
Tobin Gorey, Commonwealth Bank analyst, said while the market was expecting some cuts to corn production, the USDA cuts were a third more than the already hefty cuts that had already been factored in.
He said the drop in corn production was significant enough to put strain on world feed grain stocks.
"Feed grain supply, globallyspeaking, was comfortable, now supply conditions are closer to neutral," Mr Gorey said.
"Another major crop downgrade in the US or elsewhere would leave supply on the tight side."