New York: Corn output will trail US government forecasts by 2.8 per cent and the soybean crop may be 3.4 per cent less than estimated after a drought scorched the Midwest, the Professional Farmers of America said.

Corn production will be 10.478 billion bushels, less than the 10.779 billion that the US Department of Agriculture forecast on August 10, the Cedar Falls, Iowa-based publisher said on Saturday in an e-mailed statement. Soybean output will be 2.6 billion bushels, below the government estimate of 2.692 billion.

The latest projections were based partly on the four-day Pro Farmer Midwest Crop Tour of seven states that ended on Friday. Corn and soybean prices surged to records this month as output was poised to decline for the third straight year. Based on average temperatures and rain in June and July, the drought in the region was the most-severe since 1936, according to T-Storm Weather LLC.

“Corn was the story going into the tour, and now soybeans are the story after leaving fields this week,” Peter Meyer, a senior director of agriculture commodities at PIRA Energy Group in New York, said in an interview in Owatonna, Minnesota, after completing his sixth tour. “Mother Nature shut down the soybean crop well before it reached its potential. The US may run out before the start of the South America harvests in February.”

Meyer, who correctly forecast a smaller corn crop and rising prices after the past two tours, said production of the grain may fall 6.1 per cent below the government’s estimate, and soybeans may drop 5.3 per cent.

The USDA said this month that corn production may fall 13 per cent from a year earlier, and the soybean harvest may drop 12 per cent.

Smaller crops may increase costs for ethanol refiners such as Archer Daniels Midland Co. and Valero Energy Corp and meat producers including Tyson Foods Inc and Smithfield Foods Inc, which buy grain for livestock feed.

This month, Cargill Inc, one of the world’s biggest agriculture companies, said quarterly profit slumped 82 per cent because of lower margins for beef and soybean processing.

Since June 15, corn prices have jumped 60 per cent, reaching a record $8.49 a bushel on August 10. Soybeans have surged 32 per cent, touching an all-time high yesterday of $17.4475.

On Friday, corn futures for December delivery fell 0.7 per cent to $8.0925 on the Chicago Board of Trade. Soybean futures for November delivery rose 1 per cent to $17.315.

This year, soybeans have surged 43 per cent, the biggest gain among 24 energy, metal and agriculture prices in the Standard & Poor’s GSCI Spot Index, followed by wheat in Chicago and Kansas City, and corn at 25 per cent.

Corn may rise to $9.50 and soybeans might jump to $20, said Eduardo Rodriguez, a vice president of sales at Fintec Group in Chicago and a tour participant.

“We’ll see the peak of prices sometime between September and October once the harvest kicks in and you see that the yields confirm how severe the situation is,” Rodriguez said.

Reduced corn and soybean supplies are spurring farmers to shrink cattle and hog herds and reduce chicken production in the US and South America, Christopher Narayanan, the head of agricultural research for Societe Generale SA, said yesterday in Owatonna after the tour.

“The smaller crops mean short supplies of meat by next March or April,” Narayanan said. “The US summer grilling season will be expensive in 2013.”

More than 120 farmers, hedge fund and bank analysts, grain buyers and agronomists took field samples on the 20th annual tour. Corn-yield estimates trailed US forecasts in Nebraska, Minnesota, Ohio and South Dakota, and soybean-pod counts signalled lower output in those states and in Iowa, the biggest state grower of the oilseed.

The tour also covered Indiana.

The size of corn kernels and soybean probably will shrink because the drought has reduced the ability of plants to move sugars, protein and starch into the grain and oilseeds, said Byron Jones, a farmer from Saybrook, Illinois, who has participated in every tour since 1993.

“These are the worst crops I’ve ever seen in Illinois because the drought hurt the crops planted on the best soils,” said Jones, who has been farming since 1961. “The yield decline is not over yet because the crop is going to shrink more.”

Corn is the biggest US crop, valued at $76.5 billion in 2011, followed by soybeans at $35.8 billion, government figures show. Last year, the nation was the top producer and exporter of the grain and oilseed.