The Agriculture Department’s monthly crop report lowered the 2012 production forecasts for corn and soybeans. American Farm Bureau Federation (AFBF) economists say the report was “bearish” for corn prices in one respect, because the estimate for ending stocks was not reduced as much as expected by some market analysts.

“­­­­­­As anticipated, lower projected production for both corn and soybeans was reported this month,” says AFBF economist Todd Davis. “­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­It will be some time before the long-term effects of the 2012 drought are fully played out. But it appears likely that continued strong worldwide demand for corn and soybeans will lead to higher projected prices.”

USDA forecast corn production at 10.7 billion bushels. The average yield for corn was forecast at 122.8 bushels per acre this year, down slightly from the August prediction. AFBF officials say that if this holds true, the corn crop would produce the smallest average yield since 2003.

Soybean production is forecast at 2.63 billion bushels. The average yield for soybeans was forecast at 35.3 bushels per acre. If this projection holds true, it would be the smallest average yield since 1996.

Corn-ending stocks for the marketing year were pegged slightly higher compared to USDA’s August estimate, at 733 million bushels, which represents 24 days of supply.

Ending stocks for soybeans were projected to be 115 million bushels (about a 15-day supply), unchanged compared to USDA’s August projection.

The corn and soybean planting season in South America, which begins soon, continues to be the subject of much attention and speculation.

“All eyes are on South America as spring begins,” Davis says. “Weather remains a major factor for crops in both North and South America. A bountiful harvest of both corn and soybeans is needed to rebuild stocks of these important crops,” he says.

USDA will be conducting producer surveys and field analysis throughout the fall, which will provide information about the drought damage done to the 2012 corn and soybean crops, according to Davis.