Aug. 20, 2012
In late July, the U.S. Department of Agriculture (USDA) cut more than 46 million tonnes off its estimate for U.S. corn (maize) production as drought continues to affect the developing crop. The effect has been a sharp rises in prices and calls from some quarters for a cut in corn consumption for biofuels.
The U.S. drought and the effect on expected corn production has resulted in a rush of shocking headlines, such as: “U.S. drought triggers world food crisis alert as corn price soars,” in the normally measured Financial Times. It pointed out that corn (and soybean) prices had passed the peaks of 2007-08.
In a separate piece, the paper produced a suggested answer: “Soaring corn stirs up calls to curb ethanol demand.”
National Corn Growers Association President Garry Niemeyer rejected the calls.
“This is a time when farmers and ranchers are suffering the nation’s worst drought in years, covering nearly two-thirds of our country’s land mass,” he said. “Like any crisis, it has led to numerous inaccuracies and exaggerations, especially when it comes to the impact on food supply and retail food prices.
“Yesterday at the White House, USDA Secretary Tom Vilsack noted that farmers only receive a fraction – about 14 cents – of every dollar spent on food at the grocery store,” he said. “Look at corn, for example, which even at its current price is an inexpensive food ingredient. The corn in a box of Corn Flakes only costs about a dime, and there’s just over (25 cents) worth of corn in a pound of beef.”
When it comes to the Renewable Fuel Standard for ethanol and other biofuels, now is not the time for changes, he said. “It’s working. The RFS is revitalizing rural America, reducing our dependence on foreign fuel and reducing the cost of gasoline. Making changes to the RFS now would only ensure that consumers suffer due to significantly higher fuel prices.”
The July edition of the USDA’s World Agricultural Supply and Demand Estimates report gave an idea of the scope of the problem. “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,” it said.
“U.S. feed grain supplies for 2012-13 are projected sharply lower with corn production prospects reduced 1.8 billion bushels from last month. The projected U.S. corn yield is lowered 20 bushels per acre to 146 bushels reflecting the rapid decline in crop conditions since early June and the latest weather data.”
It now puts U.S maize production in 2012-13 at 329.45 million tonnes, compared with 375.68 million in the estimates it released in June. Last year’s production was 313.92 million tonnes. Brazil, which the Financial Times suggested would be an alternative source for U.S. corn users, is slated to produce 67 million tonnes, an estimate unchanged since the previous month and which compares with 70 million in 2010-11.
In its corn market recap on July 20, the Chicago Board of Trade suggested a bleak outlook for crop weather. “Weather forecasts continue to look abysmal for U.S. row crops the next two weeks with below normal rainfall and above normal temperatures in the central Midwest,” it said. “Yield could fall further if current weather patterns persist into August.”
Bob Stallman, president, American Farm Bureau Federation, issued a statement on the effect of the drought, highlighting the effects on other sectors. “Data suggests that most of the corn and other row crops in the drought-stricken regions are covered by crop insurance,” he said. “The drought’s effect on the 2012 corn crop is all the more dramatic because of the initial projections that U.S. farmers would harvest the largest corn crop ever. The latest forecasts still suggest we are on pace to produce the third or fourth largest corn crop on record.”
Chris Lyddon is World Grain’s European editor. He may be contacted at: firstname.lastname@example.org.