Corn prices are jumping after the USDA cut corn yield by 20 bushels per acre to 146 bushels per acre.

This is down from 166 bushels per acre because of poor crop conditions from early June and because of the heatwave and drought conditions plaguing the Midwest.

The corn crop forecast was cut 12 percent to 12.97 billion bushels. Corn futures are up 3.20 percent on the news.

From the report:

"Persistent and extreme June dryness across the central and eastern Corn Belt and extreme late June and early July heat from the central Plains to the Ohio River Valley have substantially lowered yield prospects across most of the major growing regions. Harvested area is also reduced slightly based on the June 29 Acreage report.

Reduced supplies and higher prices are expected to sharply lower 2012/13 corn usage with the biggest reduction for feed and residual disappearance, projected down 650 million bushels. Food, seed, and industrial use is also projected lower, down 105 million bushels, mostly reflecting a 100-million-bushel reduction in corn used to produce ethanol. Exports are projected 300 million bushels lower as tight supplies, higher prices, and strong competition from South American exporters limit U.S. shipments.

A 52-million-bushel increase in beginning stocks and a 15- million-bushel increase in imports offset only a small portion of the expected reduction in this year’s crop. Ending stocks for 2012/13 are projected at 1.2 billion bushels, down 698 million from last month’s projection. The season average 2012/13 farm price for corn is projected at $5.40 to $6.40 per bushel, up sharply from $4.20 to $5.00 per bushel in June."

Wheat futures are up 2.36 percent after the USDA report showed that global wheat supplies for 2012 - 2013 period are projected to decline 5.1 million tons and with world production lowered 6.7 million tons with reductions for Russia, Kazakhstan, and China. Meanwhile, soybean futures are up 1.87 percent.

Here's a chart showing the dramatic spike in corn futures after the USDA release:

More to come...