USDA cuts corn yield forecast by 12 percent

Some Midwest farmers cutting, baling plants to use as hay

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Published: July 11 2012 | 8:10 am - Updated: 31 March 2014 | 9:36 pm in
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Some cornstalks in fields around the farm where David Kellerman works stand tall, but appearances can be deceiving. When the husks are pulled back, the cobs are empty. No kernels developed as the plants struggled with heat and drought.

The soil in Kellerman's part of southern Illinois is like dust after less than an inch of rain since mid-April.

This week, he and the farmer he works with packed it in. They cut and baled the withered plants to use as hay for their cattle.

As the worst drought in nearly 25 years spreads across the nation, farmers in Illinois and Indiana are finding themselves among the hardest hit. But they are not alone, and conditions are likely to get worse throughout the middle of the country with an unusually hot summer in the forecast.

Almost a third of the nation's corn crop is already showing signs of damage, and on Wednesday, the U.S. Department of Agriculture released yet another report predicting that farmers will get only a fraction of the corn anticipated last spring when they planted 96.4 million acres, the most since 1937.

It's too soon to say how that will affect food prices. The cost of meat is most likely to be affected because corn is used to feed cattle, and its price is usually passed along in the cost of hamburger and steak. But meat prices were already rising and were expected to stay high after last year's drought in Texas forced many ranchers to reduce their herds.

Corn also is widely used as an ingredient — in corn flakes to ketchup, bread and soda pop — but it accounts for a small fraction of their costs compared to such things as transportation and marketing. A rule of thumb is that food prices typically climb about 1 percent for every 50 percent increase in average corn prices, said Richard Volpe, a USDA food markets research economist.

The government has already predicted food prices will increase this year by as much as 3.5 percent. It won't be clear until the fall, when all the damage is known, how much the crop loss will add to that, Volpe said.

Meanwhile, corn futures jumped three percent Wednesday on the Chicago Board of Trade after the USDA slashed its forecast average yield for this year's crop due to the impact of the heat wave.

The USDA is projecting an average yield of 146 bushels an acre, down 20 bushels an acre, or 12 percent, from its forecast average  yield last month.

Corn futures climbed more than 3 percent, to $7.49 per bushel, for September delivery. That's still shy of the all-time high futures price of $7.99 3/4 per bushel in 2008.

The USDA said it lowered the average projected yield "reflecting the rapid decline in crop conditions since early June and the latest weather data.

"Persistent and extreme June dryness across the central and eastern Corn Belt and extreme late June and early July heat from the central Plains to the Ohio River Valley have substantially lowered yield prospects across most of the major growing regions."

Don Roose, president of U.S. Commodities in West Des Moines, said this year is beginning to resemble the drought years of 1983 and 1988.

"In 1988 we put our tops (futures price) in before July, and in 1983 we started our rally after July 4, but both turned out to be dry,  drought years," Roose recalled. "This year kind of has some of both years."

The most recent weekly crop report, issued Monday by the USDA and the Iowa Department of Agriculture and Land Stewardship, said conditions declined "significantly" last week in Iowa due to the temperatures and lack of moisture, with a growing threat from rising insect populations. Statewide, precipitation for the week averaged only 0.02 inches, the driest week in 21 weeks.

Temperatures averaged 9.3 degrees above normal for the week that ended Sunday.

Topsoil moisture also declined, the USDA reported, with 48 percent of crop acreage rated "very short" and 40 percent labeled "short." Only 12 percent of the crop acreage was rated “adequate” in soil moisture.

The condition of Iowa’s corn crop was rated 5 percent very poor, 13 percent poor, 36 percent fair, 40 percent good and 6 percent excellent.

Roose agreed with the USDA report that the higher prices likely will reduce demand for corn. The USDA is projecting a decline of 300 million bushels in export demand, a 650 million bushel dropoff in feed grain demand, and 100 million bushels less for ethanol production.

The USDA report also projected a lower soybean yield of 40.5 bushels per acre, down 3.4 bushels from last month. The agency said the lower projection "reflects sharply declining crop conditions resulting from limited rainfall since early April coupled with excessive heat across much of the producing area in late June and early July."

Soybean prices jumped 23 cents per bushel to $15.62 per acre.

"Soybean supplies are 160 million bushels below last month’s forecast due to lower beginning stocks and reduced production," the USDA said.

George C. Ford and Associated Press reported this story. Dave DeWitte of The Gazette also contributed to the story.

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