The U.S. will harvest its smallest corn crop in three years after weather problems plagued farmers over the spring and summer, underscoring the outlook for dwindling supplies and expensive feed that's expected to send the livestock industry’s use of the grain to a 22-year low.

Farmers are expected to harvest 12.31 billion bushels of corn this fall, down about 1 percent from an estimate a month ago and down a similar amount from last year’s crop, the U.S. Department of Agriculture said in its Crop Production update Nov. 9.

While farmers are still on track for the fourth-largest corn harvest on record, the crop fell short of loftier expectations earlier this year, when high prices spurred increased plantings. Corn prices are down from all-time highs near $8 a bushel in June but likely will remain elevated well into 2012 with domestic stockpiles heading toward a 16-year low by the end of next summer, analysts say.

The USDA “essentially reinforced what we already knew, which is that corn stocks will remain tight,” said Marty Foreman, an analyst with Doane Advisory Services. Corn futures may decline over the near-term, “but generally, prices must remain high in order to accomplish the price rationing implied by USDA’s current forecast,” he said.

Grain prices in Chicago fell Nov. 9 as renewed concern over Europe’s debt crisis weighed on global markets, with corn futures for December delivery dropping 4 ½ cents to $6.56 a bushel. Corn futures are still up 11 percent from seven-month low in late September.

The USDA’s corn harvest projection was about 9 million bushels below the average analyst estimate, based on a survey conducted by Dow Jones Newswires.

Wet spring, summer heat wave take a toll

Many farmers were forced to plant corn later than the ideal period because a cold, wet spring delayed fieldwork in much of the Midwest. A few months later, a damaging July heat wave coincided with the crop’s critical pollination phase.

Those factors contributed to weaker yields in Illinois, Minnesota and other top producers. Nationwide, the corn crop is expected to average 146.7 bushels an acre, down 1 percent from an October estimate and the lowest average since 2003, the USDA said.

In the USDA’s monthly Supply and Demand report, also released Nov. 9, the agency left unchanged its forecast for farm-level corn prices in 2011-12 at an average of $6.20 to $7.20 a bushel, up from $5.18 last year and $3.55 in 2009-10.

High feed costs have already forced poultry companies to curb production, and beef and pork producers “almost certainly will not escape unscathed” with corn likely to remain expensive over the next year, said Scott Davis, who runs Bullpen Trading, LLC, a Rochester, Minn.-based advisor and broker.

“For USDA's projections to be accurate, (high) prices must force cutbacks across the livestock sector, cuts that USDA's data have not shown happening yet at $6.50 corn,” Davis said in an e-mail. “That keeps alive the threat of a move back above $7 to squeeze someone else out.”

In recent years, cattle feedlot operators, hog producers and others in the livestock sector faced greater competition from a rapidly-expanding ethanol industry, which last year consumed a record amount of corn, 5.02 billion bushels, or 35 percent of the U.S. supply.

The USDA lowered so-called feed and residual use for corn to 4.6 billion bushels for the 2011-12 marketing year, which began Sept. 1. That's down 100 million bushels from a previous estimate and would mark the lowest figure for that category since 4.46 billion bushels in 1989-90.

U.S. corn inventories at the end of the 2011-12 marketing year will total 843 million bushels, the USDA said, down 23 million bushels from an October projection but about 42 million bushels above the average analyst forecast. Supplies would still be down 25 percent from 2010-11 and would be the lowest amount of corn on hand prior to a new harvest since 1996.

Supermarket beef, pork prices heading higher

Retail beef and pork inflation is already rising at among the highest rates from the past two decades, and consumers probably will pay even more for steaks, chops and bacon next year with the USDA predicting declines in U.S. production of both meats, analysts say.

That makes it crucial farmers to avoid weather difficulties and grow more corn in 2012, analysts said.

This year’s harvest “is a big crop, but demand is very strong and the U.S. will need every bushel of corn produced this year to meet the need for food and fuel and to rebuild supplies to a more comfortable level,” American Farm Bureau Federation crops economist Todd Davis said in a statement.

“The story for 2012 will be the same as 2011,” the Farm Bureau's Davis said.”The U.S. will need more acreage, good yields and a bigger crop next year to meet demand and build supplies.”

Farmers are expected to harvest 3.05 billion bushels of soybeans, the USDA said. That’s slightly lower than the average estimate of 3.06 billion bushels in the Dow Jones survey and down 8.4 percent from the 2010 crop.