Corn prices staged a surprise turnaround this morning, reversing higher from fresh contract lows, after USDA shocked the trade with lower than expected estimates of 2013 crop production and ending stocks.

USDA pegged the crop at 13.925 billion bushels, just 28 million above the number found by the Farm Futures survey released earlier this week, which was the lowest in the industry. USDA juggled its assessment of harvested acreage and yields, putting the average for the crop nationwide at 158.8 bpa, down 1.6 bpa from its last estimate, though acreage went up 436,000.

Wheat slumps on bigger carryout, beans hang on to earlier gains.

But that was only the start of the adjustments. The government came in with a lower than expected reading on Dec. 1 corn inventories, suggesting feed usage in the first quarter of the marketing year was good despite the late harvest. That raised the total forecast for feeding during the marketing year by100 million bushels. USDA also increased its forecast of usage for ethanol by 50 million bushels, following strong demand. That was offset by a 50 million bushel decline in other industrial usage, leaving ending stocks at 1.631 billion. Projected carryout was slightly lower than the Farm Futures estimate of 1.654 billion, also the lowest in the industry.

Old crop prices jumped 15 cents following the report, while USDA raised its average price forecast for the crop by a nickel to $4.40.

Soybeans surged after the pit open this morning on news of more export sales, with March up more than 25 cents at one point. Gains started to fade into the report a bit, but the market stayed higher after the government left traders with mixed news on soybeans.

One the one hand, the government said the crop was bigger than expected at 3.289 billion bushels, 10 million above trade guesses and 35 million more than Farm Futures found in its survey. However, thanks to strong demand, the agency made no change to its ending stocks forecast, raising crush 10 million bushels and exports 20 million to offset the impact of the bigger crop.

USDA's Dec. 1 stocks estimate of 2.148 billion suggests strong usage before the official start of the crop year on Sept. 1 due to very tight inventories following the 2012 drought. The agency left its forecast for average cash prices unchanged at $12.50.

The government bumped up its forecast of production in Brazil but lower its estimate of soybean meal exports out of Argentina, with the size of the crop there unchanged.

Wheat prices were the big loser in today's data dump. The agency lowered its forecast of feed usage by 60 million bushels. That likely reflects lower usage in the second quarter of the wheat marketing year caused by the big inverse of wheat to corn. That reduction was only partly offset by stronger exports, which were raised by 25 million bushels, leaving ending stocks up 33 million bushels. The shift caught the trade leaning in the wrong direction, which triggered double digit losses in Chicago and Kansas City futures.

The selling came despite a lower than expected reading on winter wheat acres. USDA put seedings at 41.892 million, more than 1.5 million less than trade guesses. While planting of hard red winter wheat was higher than a year ago, farmers slashed soft red winter wheat acres by more than 1.5 million compared to 2013. A sharp increase in world stocks also weighed on prices, with USDA bumping up its total by almost 100 million bushels due to bigger crops in China and the Former Soviet Union.