U.S. Corn Growers Farming in Hell as Midwest Heat Spreads


The worst U.S. drought since Ronald Reagan was president is withering the world?s largest corn crop, and the speed of the damage may spur the government to make a record cut in its July estimate for domestic inventories.

Tumbling yields will combine with the greatest-ever global demand to leave U.S. stockpiles on Sept. 1, 2013, at 1.216 billion bushels (30.89 million metric tons), according to the average of 31 analyst estimates compiled by Bloomberg. That?s 35 percent below the U.S. Department of Agriculture?s June 12 forecast, implying the biggest reduction since at least 1973. The USDA updates its harvest and inventory estimates July 11.

Crops on July 1 were in the worst condition since 1988, and a Midwest heat wave last week set or tied 1,067 temperature records, government data show. Prices surged 37 percent in three weeks, and Rabobank International said June 28 that corn may rise 9.9 percent more by December to near a record $8 a bushel. The gain is threatening to boost food costs the United Nations says fell 15 percent from a record in February 2011 and feed prices for meat producers including Smithfield Foods Inc. (SFD)

?The drought is much worse than last year and approaching the 1988 disaster,? said John Cory, the chief executive officer of Rochester, Indiana-based grain processor Prairie Mills Products LLC. ?There are crops that won?t make it. The dairy and livestock industries are going to get hit very hard. People are just beginning to realize the depth of the problem.?
Top Commodities

Corn rallied 18 percent in the month through July 6 on the Chicago Board of Trade to $6.93, trailing only wheat among 24 commodities tracked by the Standard & Poor?s GSCI Spot Index, which rose 2 percent. The MSCI All-Country World Index of equities advanced 4 percent, and the dollar gained 1.3 percent against a basket of six currencies in the period. Treasuries returned 0.5 percent, a Bank of America Corp. index shows. Corn for December delivery in Chicago extended the rally today, jumping as much as the 40-cent limit to $7.33.

About 53 percent of the Midwest, where farmers harvested 60 percent of last year?s U.S. crop, had moderate to extreme drought conditions as of July 3, the highest since the government-funded U.S. Drought Monitor in Lincoln, Nebraska, began tracking the data in 2000. In the seven days ended July 6, temperatures in the region averaged as much as 15 degrees Fahrenheit above normal. Soil moisture in Illinois, Indiana, Ohio, Missouri and Kentucky is so low that it ranks in the 10th percentile among all other years since 1895.

Fields are parched just as corn plants began to pollinate, a critical period for determining kernel development and final yields. About 48 percent of the crop in the U.S., the world?s largest grower and exporter, was in good or excellent condition as of July 1, the lowest for that date since 1988 and down from 77 percent on May 18, government data show.

Yield Losses

The USDA may cut its production forecast by 8.5 percent, the biggest July reduction since a drought in 1988 led the government to cut its estimate by 29 percent, a separate Bloomberg survey of 14 analysts showed. Farmers probably will collect 13.534 billion bushels, compared with the USDA?s June forecast for a record 14.79 billion, based on the average of estimates in the survey.

Goldman Sachs Group Inc. said July 2 that yields will reach 153.5 bushels an acre, below the USDA estimate for an all-time high of 166.

?Corn yields were falling five bushels a day during the past week? in the driest parts of the Midwest, said Fred Below, a plant biologist at the University of Illinois in Urbana. ?You couldn?t choreograph worse weather conditions for pollination. It?s like farming in hell.?
Record Crop

Even with the drought, U.S. production in 2012 is expected to rise 9.5 percent from last year to a record after farmers sowed the most acres since 1937, the survey showed. Higher output would help boost inventories before next year?s harvest, up from what analysts said will be a 16-year low on Sept. 1 of 837 million bushels.

Futures fell 2.2 percent on July 6, the most in two weeks, after the USDA reported a 90 percent drop in export sales in the week ended June 28. U.S. refiners curbed output of corn-based ethanol last week to the lowest since September as gasoline demand weakened, government data show.

Corn?s rally also may stall if Europe?s widening debt crisis and a faltering global economy erode record demand for the grain. The International Monetary Fund will reduce its estimate for growth this year because of weakness in investment, employment and manufacturing in Europe, the U.S., Brazil, India and China, Managing Director Christine Lagarde said July 6.

?The shrinking global economy is the elephant in the room that no one wants to discuss as long as U.S. crops are under siege,? said Dale Durcholz, the senior market analyst for Bloomington, Illinois-based AgriVisor LLC. ?Corn demand at $5 is much more robust than when it costs $7.?

More at http://www.bloomberg.com/news/2012-...ming-in-hell-as-heat-spreads-commodities.html


Corn Belt Disaster in Wake of Record Heat Wave

State College, Pa. -- AccuWeather.com reports even though the recent heat wave has ended, weeks of drought and days of 100-degree temperatures have already taken a toll on this year's corn crop in a large part of the Midwestern United States.

The corn crisis from several weeks ago is now becoming a disaster.

Many farmers in parts of Missouri, Illinois, Indiana and Kansas are facing a crop failure and financial impact. Ultimately, the consumer will likely feel the heat from the upcoming corn shortfall.

First, it was the southern part of the corn belt from Kansas to the Ohio Valley. However, during late June and early July, the drought and heat spread into the central part of the corn belt from portions of Nebraska and Iowa to southern Wisconsin.

The heat and ongoing abnormally dry to extreme drought conditions have occurred during the pollination period of the corn.

Either heat or drought can stress the stalks, but both can basically shut down the pollination process. When this happens few, small or no ears of corn form.

According to AccuWeather.com Agricultural Meteorologists, you can't raise a corn crop with less than an inch of rain over six weeks, combined with 100-degree and higher temperatures. However, these conditions have taken place in much of the southern corn belt through the week of July 4, 2012.

Evansville, Ind., has only received 0.74 of an inch of rain since June 1 and has had at least 10 days of 100-degree temperatures since the last week of June.

In the central part of the corn belt, which was in good shape until recently, 100-degree temperatures and little or no rain during the pollination period forced a turn for the worse in many areas.

In Waterloo, Iowa, in the heart of the corn belt, rainfall has dwindled to under an inch in the past several weeks, while temperatures have reached the century mark last week.

Even though some rain and lower temperatures have reached the area during the second week of July over much of the region, it is a case of too little too late.

Most of the rain this week will fall south of the corn belt.

This year's United States corn crop is likely to fall well short of original expectations.

While conditions continue to be favorable for a bumper output over the northern part of the corn belt, the poor harvest in southern areas will greatly impact overall production of this year's crop.

The upcoming shortfall is likely to impact the price of corn feed and grain-related items significantly and could trickle down to higher food and gas prices. Chickens, for example, eat primarily corn feed. Fuel currently contains between 5 and 10 percent of ethanol, which is distilled from corn.

Weather and drought conditions in the hard-hit areas were approaching that of 1988 and 1983. Extreme heat and drought hit during much of the growing season in 1988. In 1983, a burst of extreme heat occurred during the pollination period of the corn.

Despite better agricultural practices from lessons learned during drought years dating back to the 1930s, much of the corn belt does not have irrigation.

AccuWeather.com warned of the implications of building drought over the corn belt back in early June.

At least there is some good news in other agricultural areas. A wet pattern is evolving for the Mississippi Delta.

According to Agricultural Meteorologist Dale Mohler, "The coming rains will help the soybean, rice and cotton crops in Arkansas, Louisiana and Mississippi, which have been struggling in drought and excessive heat."

More at http://www.farms.com/Commentaries/corn-belt-disaster-in-wake-of-record-heat-wave-53662.aspx