Corn hits one-week high as USDA cuts yield more than expected

CHICAGO: US corn futures climbed to a one-week high on Tuesday after the US Department of Agriculture (USDA) made a bigger-than-expected cut to its yield estimate due to unprecedented planting delays.

The USDA, in a monthly report, slashed its corn yield projection by 10 bushels an acre from May , or 5.7%, to 166 bushels. Analysts had been expected a milder decline to 172.4 bushels.

The drop, along with a decrease in the USDA's expectation for how many acres farmers will plant, left the government's production estimate at 13.68 billion bushels. That would be the smallest harvest in four years.

The outlook confirmed fears among traders that heavy rains this spring had put the corn harvest in question. The wet weather prevented farmers from planting corn and raised the risk that the crop could be hurt by hot summer weather or an autumn frost.

"The USDA ripped the Band-Aid off by lowering yield by 10 bushels (per acre) and then also lowering acreage," said Ted Seifried, chief agriculture market strategist for Zaner Group in Chicago.

The Chicago Board of Trade's (CBOT) most actively traded corn contract was up 3.1% at $4.28-3/4 a bushel by 12:15 p.m. CDT (1715 GMT).

CBOT wheat gained 2% to $5.17-3/4 a bushel and soybeans rose 0.4% to $8.61-1/2 a bushel.

Concerns about planting delays last month drove corn futures to a three-year high. Prices have since eased, but farmers remain worried that the planting problems will reduce their profits as the sector is grappling with an ongoing US-China trade dispute that has slowed American agricultural exports.

The USDA said late on Monday it is looking into ways to allow farmers who have been unable to plant crops due to rain to qualify for farm aid payments linked to trade disputes.

The agency kept its production and yield estimates for soybeans unchanged from last month. The crop is typically planted after corn.

Farmers who were unable to plant corn could grow soybeans on those acres instead.

Terry Reilly, senior commodity analyst at Futures International in Chicago, said the eastern Corn Belt needs to dry down significantly in order for that to happen.

In a weekly report released on Monday, the USDA said corn planting was 83% complete, behind the average of 99%. The agency rated 59% of the crop as good-to-excellent, ahead of market expectations of 54%.

Traders, however, said it was difficult to know the crop's true condition since only 62% has emerged, well below the average of 93%.