This morning, USDA issued its World Agricultural Supply Demand Estimates (WASDE) report. In it, the agency lowered its 2011-12 estimate of corn ending stocks 18% to 714 million bushels, which was 3% below industry consensus. “We note the forecasted corn stocks-to-use ratio of 5.4% is well below the already low previous 5-year average of 11.6%,” Henry Kirn, analyst for UBS, said in a summary note to investors.

USDA also lowered its soybean ending stocks estimate 11% to 155 million bushels, which is 11% below consensus, while USDA’s wheat ending stocks forecast was essentially unchanged at 671 million bushels, in line with consensus. “We see today’s WASDE as bullish for corn and soybean prices,” Kirn says.

USDA raised the midpoint of its corn price forecast to $6.70 per bushel from $6.00. It also raised its average soybean price forecast to $13.50 per bushel from $13.00 and raised its average wheat price forecast to $7.60 per bushel from $7.30.

“Corn, soybean and wheat prices remain well above historical averages,” says Kirn, “and USDA forecasts farm cash net income to increase 8% year-over-year in 2011. We see the strength in farm profitability as likely to drive strong farm equipment demand through 2012.”