By Mark Weinraub
CHICAGO, Aug 11 (Reuters) - U.S. corn and soybean harvests will be smaller than previously expected as dry conditions early in the growing season robbed the crops of yield potential, the government said on Friday.
Both forecasts fell below market expectations, but the corn crop, if realized, would still be the second biggest on record due to large acreage and as growing conditions improved during the key development month of July.
The U.S. is expected to be the No. 2 exporter of soy and corn, after Brazil, this year.
Chicago Board of Trade soybean futures 0#S: rallied shortly after the data was released but quickly retreated to pre-report levels. Corn futures 0#C: were slightly higher, in line with their morning trading range.
"The market is trying to figure out if the yields have stabilized with the recent rains that we've seen since the surveys were taken," said Dax Wedemeyer, analyst at U.S. Commodities. "The trade is scratching its head, trying to decide which way to go."
Corn production was pegged at 15.111 billion bushels, based on an average yield of 175.1 bushels per acre, according to the U.S. Agriculture Department's monthly World Agricultural Supply an Demand Estimates report. Soybean production was seen at 4.205 billion bushels, with yields pegged at 50.9 bushels per acre.
The smaller-than-expected soybean harvest would tighten up domestic ending stocks in the 2023/24 marketing year to an eight-year low of 245 million bushels even as export demand eases, USDA said.
Corn stocks were seen ballooning by 51% to a five-year high of 2.202 billion bushels as USDA cut its outlook for demand in both the export and feed sectors.
Analysts had been expecting the report to show corn production of 15.135 billion bushels and soybean production of 4.246, according to the average of estimates in a Reuters poll. Corn yields had been estimated at 175.5 bushels per acre and soybean yields at 51.3 bushels per acre.
(Additional reporting by Karl Plume; editing by Jonathan Oatis)
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