Farmers are on pace to produce the second largest corn crop and fourth largest soybean crop in history, which may lead to lower prices for the key grains, the government said Tuesday.
In its first estimates this year based on actual field visits and farmer surveys, the U.S. Department of Agriculture raised its estimate of corn production and said "nearly ideal" weather has helped Midwestern farmers recover from June's devastating floods.
The department forecast that farmers will harvest 12.3 billion bushels of corn, up more than 570 million bushels from last month's estimate of 11.7 billion. That's down 6 percent from last year's record crop of 13.1 billion bushels, but 17 percent above the 2006 harvest.
Average corn prices this year are expected to drop to $4.90 to $5.90 per bushel, down 60 cents from last month's forecast of $5.50 to $6.50.
Corn prices soared to record levels near $8 after the floods, the worst to hit the Midwest in 15 years. But cooler, wetter weather since then will boost corn yields to 155 bushels per acre, up from last month's estimate of 148.4, the department said.
Corn prices have already dropped to almost $5 per bushel, though that is still higher than in 2006, when a bushel cost $2.
Ethanol producers such as Archer Daniels Midland Co. are also affected. VeraSun Energy, a Brookings, S.D.-based ethanol producer, delayed the opening of a plant until late July due to high corn prices.
The department raised its estimate of the amount of corn that will be used for ethanol production to 4.1 billion bushels, up from last month's estimate of 3.95 billion.