The World Agricultural Supply and Demand Estimates (WASDE) report issued this morning by the U.S. Department of Agriculture (USDA) calls for record-high prices for corn and soybeans as extreme heat and dryness continues across the Plains and Corn Belt.

Corn production for 2012/13 is projected sharply lower at 2.2 billion bushels below last month’s estimates, reducing yield projections by 22.6 bushels/acre to 123.4 bushels/acre. This would be the lowest corn yield since 1995/96.

A total of 1.5 million fewer acres are forecast to be harvested, putting corn production for 2012/13 at 10.8 billion bushels, the lowest since 2006/07. However, ending stocks for 2011/12 are expected to be 118 million bushels higher due to lower expected exports, reduced corn use for ethanol and a small increase in imports. Total U.S. corn supplies for 2012/13 are projected down 2.0 billion bushels – a nine-year low.

The 2012/13 season-average farm price for corn is projected at a record $7.50 to $8.90 per bushel, up sharply from the $5.40 to $6.40 per bushel projected in July.

This month’s large reduction in U.S. corn supplies and the sharply higher price outlook are projected to reduce total use by 1.5 billion bushels to 11.2 billion, which would be a six-year low. Ending stocks for 2012/13 are projected at 650 million bushels, 533 million bushels lower and the lowest carryover since 1995/96.

Soybean production for 2012/13 is projected at 2.7 billion bushels, down 358 million bushels due to lower harvested acres and yields. Harvest projections are for 74.6 million acres of soybeans, down 0.7 million bushels from the July projection. Yield projection is 36.1 bushels per acre, 4.4 bushels below last month’s forecast and 5.4 bushels below last year’s yield.

Soybean supplies for 2012/13 are projected 12% below last month to a nine-year low on lower production and reduced beginning stocks. Soybean exports are expected to fall 260 million bushels to 1.11 billion bushels.

Soybean and product prices are increased to record levels, reflecting the impact of sharply reduced soybean and corn production. The season-average soybean price is estimated at $15.00 to $17.00/bushel, up $2.00 on both ends. Soybean meal prices are pegged at $460 to $490/ton compared to $365 to $395/ton last month.

Total red meat and poultry production for 2012 is forecast to rise but fall in 2013 with higher feed prices pressuring producer returns.

Pork production is reduced from last month for both 2012 and 2013. Third-quarter slaughter is pegged lower, with lighter expected carcass weights throughout the year.

High feed prices and hot weather are dropping expectations for pig crop reports in the second half of 2012 through 2013. Pork production is forecast lower in 2013 due to a combination of smaller hog supplies and lower expected carcass weights, according to the WASDE report.

Hog prices are raised in both 2012 and 2013 due to smaller hog supplies.

Read the full USDA report at http://www.usda.gov/oce/commodity/wasde/latest.pdf.