* World wheat, corn, soy crops down slightly, rice up-USDA

* Corn futures dive to 7-week low after report, wheat down too

* Drought cuts Russia's wheat crop 9 pct, Kazakhstan's wheat crop 4.5 pct

* Soybean futures jump 2 pct; forecast cut more than expected

By Charles Abbott

WASHINGTON, Sept 12 (Reuters) - Searing droughts in the United States and Russia will deplete harvests of wheat, corn and soybeans, the U.S. government said on Wednesday, but global food supplies were not hurt as badly as many had feared.

With the U.S. harvest off to a fast start, the Agriculture Department said the country's corn crop would be the smallest in six years and the soybean crop would be the smallest in nine years. But even though USDA lowered its crop estimates for the United States and Russia, they are bigger than expected.

USDA's estimates of the corn and soybean stockpiles at the end of this marketing year were also larger than traders expected. One factor: high corn prices have prompted cutbacks in livestock production, reducing demand for feed and keeping more corn in stockpiles.

The USDA's World Agricultural Supply and Demand Estimates report will guide the Group of 20 wealthiest nations as it decides whether joint action is needed to prevent a repeat of the 2008 food price spike that left tens of millions of people hungry and sparked food riots in some countries.

The report eased worries about severe shortages and brought down prices of some U.S. agricultural futures. Corn futures on the Chicago Board of Trade fell to a seven-week low and wheat fell too on the prospect of larger supplies.

"Corn prices likely have peaked," said agricultural economist Darrel Good at the University of Illinois, unless a quarterly report due Sept 28,shows the corn stockpile is too small.

But soybean futures surged more than 2 percent on USDA's forecast of tight supplies. Soybeans were on track to test the record price set last week. Good said high prices are needed to stretch the crop through the marketing year.

USDA lowered its forecast of the corn crop by less than 1 percent and the soybean crop by 2 percent. Traders had expected a 3.7 percent reduction in corn and a 1 percent cut in soybeans.


THIRD SHORT U.S. CORN CROP BRINGS HUGE CUT IN USE

This is the third disappointing corn crop in a row, with production down by 18 percent from 2009's record crop. Corn use by exporters, ethanol plants and livestock feeders will drop by 9 percent this marketing year because of the short crop, USDA said, on top of a 5.5 percent contraction last year.

At the end of this marketing year, U.S. grain bins will hold a scanty 3-1/2 week supply of corn when the carryover commonly used to be six or eight weeks. The soybean stockpile will be thinner still -- barely more than a two-week supply.

"Soybeans still have a little bit of a chance to improve," USDA chief economist Joe Glauber told the USDA radio service, noting yields are up in the U.S. Southeast. The soybean harvest is just beginning.

Drought also damaged wheat crops in Russia and some of its neighbors. Russia's crop was 39 million tonnes, down 9 percent from the August estimate and the second large cut in a row. Kazakhstan's crop was reduced 4.5 percent by USDA.

World wheat supplies are only marginally lower despite the losses, USDA said, and feed grain production also is down less than 1 percent, compared with August forecasts. The world wheat crop is down 5 percent from last year and coarse grains down 2.4 percent, however.

World rice production is on par with last year. The U.S. rice crop is 6 percent larger than last year, USDA said. It boosted the rice forecast 3 percent despite concern about hurricane damage in late August.


HIGH GRAIN PRICES DISCOURAGE MEAT PRODUCTION

Record-high corn prices discouraged livestock feeding this summer, so more corn will be available in the marketing year that opened Sept. 1. USDA said some of the corn would be used as feed this year but some will go into reserves, padding U.S. supplies, because of continued high prices.

Meat production will fall this year and in 2013 as farmers grapple with higher feed prices. Hog producers will sell animals at lighter weights rather than pay to fatten them further, said USDA. Overall, the per capita meat supply would drop by 3 percent in two years.

Livestock producers have petitioned the Obama administration to waive the federal requirement to use corn-based ethanol in gasoline. They say devoting a large percentage of the corn crop to ethanol production makes livestock feed less affordable. A decision is likely in mid-November.

Analyst Mark McMinimy of Guggenheim Partners said "we continue to believe that a waiver denial is the likely outcome." With its corn forecast stabilizing, USDA's crop report does not aid the drive for relaxing the ethanol mandate, he said.

The early and fast-moving corn harvest -- 15 percent of the crop already is in the bin -- boosted corn supplies at the start of September, traditionally the low point. USDA said 1.2 billion bushels of new-crop corn was harvested before Sept. 1, up to 700 million bushels more than a year ago.

"Early new-crop use is expected to displace use of 2011 old-crop corn and boost old-crop inventories on Sept 1," USDA said.

By airing the early-harvest figure, USDA removed some of the drama from the Sept 28 Grain Stocks report, said Dan Cekander of Newedge USA.

"That was a fear, that the (corn) stocks number may come in high. And USDA addressed that issue in this report," said Cekander. "When you use the new crop immediately, as they were using it, it was clearly displacing old crop during August."

Earlier on HuffPost:

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  • In this Dec. 28, 2012 photo, corn stalks stand in a snowy field near La Vista, Neb. Despite getting some big storms in December, much of the U.S. is still desperate for relief from the nation’s longest dry spell in decades. And experts say it will take an absurd amount of snow to ease the woes of farmers and ranchers. (AP Photo/Nati Harnik)

  • In this Dec. 28, 2012 photo, Bales of corn stalks are covered with a dusting of snow near La Vista, Neb. Despite getting some big storms in December, much of the U.S. is still desperate for relief from the nation’s longest dry spell in decades. And experts say it will take an absurd amount of snow to ease the woes of farmers and ranchers. (AP Photo/Nati Harnik)

  • Severe Drought Threatens Midwest Corn Crops

    PRINCETON, IN - JULY 17: Drought-damaged corn grows in a field on July 17, 2012 near Princeton, Indiana. The corn and soybean belt in the middle of the nation is experiencing one of the worst droughts in more than five decades. Indiana was the nation's fourth largest corn producer in 2011. (Photo by Scott Olson/Getty Images)

  • Severe Drought Threatens Midwest Corn Crops

    FRITCHTON, IN - JULY 17: Corn plants dry in a drought-stricken farm field on July 17, 2012 near Fritchton, Indiana. The corn and soybean belt in the middle of the nation is experiencing one of the worst droughts in more than five decades. Indiana was the nation's fourth largest corn producer in 2011. (Photo by Scott Olson/Getty Images)

  • In this July 26, 2012 photo, dead fish float in a drying pond near Rock Port, Mo., as a turkey vulture paces the shore. Multitudes of fish are dying in the Midwest as the sizzling summer dries up rivers and raises water temperatures in some spots to nearly 100 degrees. (AP Photo/Nati Harnik)

  • Severe Midwest Drought Continues

    WYATT, MO - JULY 18: A buoy used to help guide barges rests on the bank after the water level dropped on the Mississippi River July 18, 2012 near Wyatt, Missouri. Some barge operators have lightened their loads or stopped running altogether on the lower Mississippi because of low water levels. (Photo by Scott Olson/Getty Images)

  • Midwest Farmers Continue To Struggle Against Extended Drought

    CUBA, IL - AUGUST 03: Grass, dried from heat and drought, struggles to survive in a cattle pasture August 3, 2012 near Cuba, Illinois. Cattle being raised in the pasture used to be self-sustaining. This summer's drought has forced the farmer to truck in water, after the pond dried up, and extra feed, to supplement the dry grass, from another farm nearly 20 miles away. Farmers in the Midwest and elsewhere continue to struggle after than half the counties in the United States have been designated disaster areas, mostly due to drought conditions throughout the Midwest. (Photo by Scott Olson/Getty Images)

  • Midwest Farmers Continue To Struggle Against Extended Drought

    NEW HARMONY, IN - AUGUST 03: Corn dead from drought sits in a field August 4, 2012 near New Harmony, Indiana. More than half of the counties in the United States have been designated disaster areas, mostly due to drought conditions throughout the Midwest. (Photo by Scott Olson/Getty Images)

  • The last remaining water in a drought-stricken rural pond reflects the sky and clouds near Calumet, Okla., Friday, July 20, 2012. The nation's widest drought in decades is spreading. More than half of the continental U.S. is now in some stage of drought. (AP Photo/Sue Ogrocki)

  • Cattle graze in a dry field near Calumet, Okla., Friday, July 20, 2012. (AP Photo/Sue Ogrocki)

  • Rows of corn stalks stand under a cloudless sky south of Blair, Neb., Monday, July 23, 2012. The drought-damaged field was cut down for silage. (AP Photo/Nati Harnik)

  • Central Illinois cattle stand in a pasture struggling from lack of rain and a heat wave covering most of the country, Friday, July 20, 2012, in Farmingdale, Ill. The nation's widest drought in decades is spreading. More than half of the continental U.S. is now in some stage of drought, and most of the rest is abnormally dry. (AP Photo/Seth Perlman)

  • In this July 19, 2012 photo, a herd of cattle belonging to Kendal Grecian drink from a water tank at his ranch in Palco, Kan. Grecian spent years meticulously breeding his cows to improve the genetics in each generation, but with Kansas in one of the worst droughts seen in decades, he's struggling to find enough grazing to feed 300 cows, plus their calves. He hopes to get by with selling only a quarter of his herd, but there are no guarantees with the drought expected to linger through October. (AP Photo/John L. Mone)

  • A field of corn withers under triple-degree heat north of Wichita, Kan., in Sedgwick County Monday, July 16, 2012. The drought gripping the United States is the widest since 1956, according to new data released Monday by the National Oceanic and Atmospheric Administration. Fifty-five percent of the continental U.S. was in a moderate to extreme drought by the end of June, NOAA's National Climatic Data Center in Asheville, N.C., said in its monthly State of the Climate drought report. That's the largest percentage since December 1956, when 58 percent of the country was covered by drought. (AP Photo/The Wichita Eagle, Mike Hutmacher)

  • Boats sit on the bottom in a dry cove at Morse Reservoir in Noblesville, Ind., Monday, July 16, 2012. The reservoir is down nearly 6 feet from normal levels and being lowered 1 foot every five days to provide water for Indianapolis. (AP Photo/Michael Conroy)

  • A Great White Egret looks for food on a lake drying up from lack of rain Saturday, July 21, 2012 in Chandlerville, Ill. Wildlife as well as livestock, and crops are struggling from the dry weather and a heat wave covering most of the country. The nation's widest drought in decades is spreading. More than half of the continental U.S. is now in some stage of drought, and most of the rest is abnormally dry. (AP Photo/Seth Perlman)

  • Boats sit on the dry, cracked bottom in a dry cove at Morse Reservoir in Noblesville, Ind., Monday, July 16, 2012. The reservoir is down nearly 6 feet from normal levels and being lowered 1 foot every five days to provide water for Indianapolis. (AP Photo/Michael Conroy)

  • A cow looks for something to eat as it grazes in a dry pasture southwest of Hays, Kan., in a July 6, 2012 photo. The nation's widest drought in decades is spreading. More than half of the continental U.S. is now in some stage of drought, and most of the rest is abnormally dry. (AP Photo/The Hays Daily News, Steven Hausler)

  • Corn stalks struggling from lack of rain and a heat wave covering most of the country lie flat on the ground Monday, July 16, 2012, in Farmingdale, Ill. The nation's widest drought in decades is spreading. More than half of the continental U.S. is now in some stage of drought, and most of the rest is abnormally dry. (AP Photo/Seth Perlman)

  • The gate is closed on a boat ramp leading to a dry cove at Morse Reservoir in Noblesville, Ind., Monday, July 16, 2012. The reservoir is down nearly 6 feet from normal levels and being lowered 1 foot every five days to provide water for Indianapolis. (AP Photo/Michael Conroy)

  • Farmer Joe Fischer holds ears of corn showing the variety of kernal development Thursday, July 12, 2012, at Fischer Farms Inc. in Owensboro, Ky. Normally the silks would already be brown, Fischer said. "There is no pollen left because the silks were delayed. . . because it has been too hot and dry," Fischer said. All five Owensboro-area counties have been designated primary disaster areas because of drought. (AP Photo/The Messenger-Inquirer, John Dunham)

  • Devin Davis of Paul Tree Farms uses a special water canon to water 30,000 trees on the 60 acre farm Saturday, July 21, 2012 in Pleasant Plains, Ill. The trees as well as livestock, wildlife and crops are struggling from lack of rain and a heat wave covering most of the country. The nation's widest drought in decades is spreading. More than half of the continental U.S. is now in some stage of drought, and most of the rest is abnormally dry. (AP Photo/Seth Perlman)

  • A pontoon is anchored on a mud flat as the owner could not reach their dock at Morse Reservoir in Noblesville, Ind., Monday, July 16, 2012. The reservoir is down nearly 6 feet from normal levels and being lowered 1 foot every five days to provide water for Indianapolis. (AP Photo/Michael Conroy)

  • This Thursday, July 5, 2012 photo shows dry soil in a corn field in western Kentucky. Persisting drought conditions have endangered corn fields in western Kentucky. (AP Photo/The Paducah Sun, Allie Douglass)

  • Illinois Farms Hurt By Continued Midwest Drought

    OLMSTED, IL - JULY 26: A corn plant grows in a field parched by drought on July 26, 2012 near Olmsted, Illinois. The field, farmed by Kevin Ulrich, was one of several in the drought stricken region of Southern Illinois that were visited by officials from the United States Department of Agriculture's (USDA) Farm and Foreign Agriculture Services (FFAS) department and Farm Service Agency (FSA). Seventy percent of Illinois, the nation's number two corn producing state, is classified as experiencing some level of drought.(Photo by Scott Olson/Getty Images)

  • Burnt stalks lie on the ground among rows of corn damaged by drought in a parched field in Louisville, Ill. on Monday, July 16, 2012. Over ten days of triple digit temperatures with little rain in the past two months is forcing many farmers to call 2012 a total loss. Rows of corn sit under high temperatures, burning and crisping until the stalks eventually fall, burning into the dry soil. (AP Photo/Robert Ray)

  • Four rows of corn left for insurance adjusters to examine are all that remain of a 40-acre cornfield in Geff, Ill. that was mowed down Monday, July 16, 2012. Over ten days of triple digit temperatures with little rain in the past two months is forcing many farmers to call 2012 a total loss. (AP Photo/Robert Ray)

  • Jack Maloney checks on corn on his farm in Brownsburg, Ind., Monday, July 16, 2012. With no significant rainfall since May 3 and the bleak outlook for rain, Maloney expects a total loss on his corn and soybean crop. (AP Photo/Michael Conroy)

  • A dry field of corn is seen near Fremont, Neb., Monday, July 16, 2012. The drought gripping the United States is the widest since 1956, according to new data released by the National Oceanic and Atmospheric Administration. (AP Photo/Nati Harnik)

  • Jack Maloney displays a drought-damaged ear of corn on his farm in Brownsburg, Ind., Monday, July 16, 2012. With no significant rainfall since May 3 and the bleak outlook for rain, Maloney expects a total loss on his corn and soybean crop. (AP Photo/Michael Conroy)

  • An empty dock sits on the bottom of a dry cove at Morse Reservoir in Noblesville, Ind., Monday, July 16, 2012. The reservoir is down nearly 6 feet from normal levels and being lowered 1 foot every five days to provide water for Indianapolis. (AP Photo/Michael Conroy)

  • Leaves become dry and brittle on stalks of corn in a parched field outside Effingham, Ill., Monday, July 16, 2012. The drought gripping the United States is the widest since 1956, according to new data released Monday by the National Oceanic and Atmospheric Administration. This summer, 80 percent of the U.S. is abnormally dry, and the report said the drought expanded in the West, Great Plains and Midwest last month with the 14th warmest and 10th driest June on record. (AP Photo/Robert Ray)

  • A dry field of corn is seen near Fremont, Neb., Monday, July 16, 2012. The drought gripping the United States is the widest since 1956, according to new data released by the National Oceanic and Atmospheric Administration. (AP Photo/Nati Harnik)

  • The sun rises Sunday, July 15, 2012, in Pleasant Plains, Ill. Corn stalks are struggling in the heat and continuing drought that has overcome most of the country. All of Illinois is officially in a drought, and Illinois Gov. Pat Quinn plans a trip to southern Illinois to discuss the state's plans for responding to dry conditions. (AP Photo/Seth Perlman)

  • Joe Fischer checks on his corn field Thursday, July 12, 2012, at Fischer Farms Inc. in the 3700 block of Fisher Road in Owensboro, Ky. "We've been in a drought for the last three weeks," he said. Fischer farms the property with his brother Tony Fischer. They planted 900 acres of corn with 30,000 plants per acre. "We have no idea what our yield will be," Joe Fischer said. U.S. Agriculture Secretary Tom Vilsack has designated 26 Kentucky counties among more than 900 counties in 29 states as disaster areas. (AP Photo/Messenger-Inquirer, John Dunham)

  • In this photo taken June 27, 2012, farm worker Juan Carlos walks to an irrigated soybean field near England, Ark. The U.S. Agriculture Department has granted a disaster declaration for 69 of Arkansas' 75 counties due to the drought. (AP Photo/Danny Johnston)

  • Midwest Farmers Continue To Struggle Against Extended Drought

    CUBA, IL - AUGUST 03: Cattle try to keep cool in the remains of a farm pond in a pasture heavily damaged by drought August 3, 2012 near Cuba, Illinois. Farmers in the Midwest and elsewhere continue to struggle after than half the counties in the United States have been designated disaster areas, mostly due to drought conditions throughout the Midwest. (Photo by Scott Olson/Getty Images)

  • Midwest Farmers Continue To Struggle Against Extended Drought

    CUBA, IL - AUGUST 03: Cattle nibble the remains of grass in a pasture heavily damaged by drought August 3, 2012 near Cuba, Illinois. Farmers in the Midwest and elsewhere continue to struggle after than half the counties in the United States have been designated disaster areas, mostly due to drought conditions throughout the Midwest. (Photo by Scott Olson/Getty Images)

  • Steve Niedbalski chops down his drought and heat stricken corn for feed Wednesday, July 11, 2012 in Nashville Ill. Farmers in parts of the Midwest are dealing with the worst drought in nearly 25 years. (AP Photo/Seth Perlman)

  • Illinois Gov. Pat Quinn, second left, peels away the husk of a drought-ravaged ear of corn, only to find it had no kernels, as Illinois Farm Bureau President Philip Nelson, right, looks on during visit to the Laird Family Farm in Waltonville, Ill. on Monday, July 16, 2012. Quinn says the state will offer an array of debt restructuring and loan programs to farmers and ranchers affected by the drought. Drought is affecting much of the Midwest, where almost a third of the nation's corn crop has been damaged by heat and drought so severe that some farmers have cut down crops midway through the growing season. (AP Photo/Jim Suhr)

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    WYATT, MO - JULY 18: Corn plants struggle to survive in a drought-stricken farm field on July 18, 2012 near Wyatt, Missouri. The corn and soybean belt in the middle of the nation is experiencing one of the worst droughts in more than five decades. All 114 of Missouri's counties have received disaster designations because of drought. Last year this area, which sits across the Mississippi River from Illinois, was ravaged by flooding after the Army Corps of Engineers blasted a hole in a levee to save the town of Cairo, Illinois from the rising Mississippi. (Photo by Scott Olson/Getty Images)

  • Severe Midwest Drought Continues

    VINCENNES, IN - JULY 18: Corn plants struggle to survive in a drought-stricken farm field on July 18, 2012 near Vincennes, Indiana. The corn and soybean belt in the middle of the nation is experiencing one of the worst droughts in more than five decades. Indiana was the nation's fourth largest corn producer in 2011. (Photo by Scott Olson/Getty Images)

  • In this July 26, 2012 photo, dead fish decompose in a drying pond near Rock Port, Mo. Multitudes of fish are dying in the Midwest as the sizzling summer dries up rivers and raises water temperatures in some spots to nearly 100 degrees. (AP Photo/Nati Harnik)

  • This photo from July 31, 2012 shows a beached air boat as bathers walk in the nearly dry Platte River near Yutan, Neb., Tuesday, July 31, 2012. The latest U.S. Drought Monitor survey shows an increase in extreme drought conditions in four Plains states but a slight decrease in the overall area of the lower 48 states experiencing some form of drought. (AP Photo/Nati Harnik)