The scaled-back estimate has sent corn and soybean prices soaring by more than a third over the past month, Charles Abbott of Reuters reports, which could most impact the world's poor if the drought continues. Traders had expected USDA to be more conservative in its news estimate, but were shocked by the new numbers. The chairman of the World Agriculture Outlook Board said the 12 percent cut was the largest he had ever seen. USDA cut its corn harvest projection to 13 billion bushels for 2012/2013, the lowest yield since 2003. As a result, it reduced corn ending stock forecasts by 37 percent. Soybean estimated yields were cut almost 8 percent to 40.5 bushels per acre, the second lowest since 2003. (Read more)
"Agricultural economists said their main concern was the U.S. drought as the corn and soya crops enter their critical development phase," Emiko Terazono and Javier Blas of The Financial Times report. The USDA said in its report about the estimates that "the drop reflects sharply declining crop conditions resulting from limited rainfall since early April, coupled with excessive heat across much of the producing area in late June and early July."