The world's corn market will end 2009-10 tighter than had been thought because of the damage caused by drought in China and the temptation for South American growers to plant higher-priced soybeans instead.

The US Department of Agriculture raised its estimate for America's crop by 193m bushels (4.92m tonnes) to 12.95bn bushels (329.1m tonnes), thanks to a yield now pegged to set a record of 161.9 bushels per acre.

However, the impact on global stocks was more than offset by higher hopes for domestic consumption and weaker crops elsewhere.

The department cut 3.0 tonnes from estimates for output from Argentina and Brazil, where plantings were "projected lower, with price incentives encouraging producers to switch to soybeans".

'Extended summer dryness'

China's output would come in at 160.0m tonnes, 2.5m tonnes below last month's estimate, and below official Chinese forecasts.

"Yield prospects were reduced by extended summer dryness in western portions of the northeastern growing region," the department said in its monthly crop supply and demand report.

Nonetheless, the estimate was well above some projections by some analysts of figures below 150m tonnes.

World production was pegged at 794.1m tonnes, 2.27m tonnes lower than the previous forecast.

Global stocks would finish the 2009-10 year at 139.1m tonnes, 2.4m tonnes less than predicted in August.

Market reaction

While the data was initially welcomed in Chicago, the prospect of further benign weather wiped out early gains.

Weak soybean prices also weighed on corn, traders said.

The benchmark December contract stood at 3.13 ½ a bushel at 15:00 GMT, down 1.75 cents on the day.