Drought Impacting Corn Producers and Consumers

Deepening drought conditions are pushing corn and soybean prices higher, and that is having serious implications for the livestock and energy sector. The latest USDA crop update said that a large portion of the corn crop moved into the pollination stage under these extreme conditions. Some farmers and crop insurance representatives are discussing the prospect of destroying or cutting corn for forage. According to the update released Monday afternoon, “Corn condition continued to decline and is now rated 12 percent good to excellent compared with 59 percent last year at this time.”  HAT market analyst Gary Wilhelmi reports that current market estimates are for corn yields to average about 150 bpa.

 

The sharp and sudden rise in corn prices is putting livestock producers in a very difficult position. Many are concerned that they will not be able to afford feed for their animals, while others fear there will not be enough corn to go around. Don Vilwock, with Indiana Farm Bureau, says it is a serious situation, “This has really put livestock producers between a rock and a hard place.” He said those who must purchase their feed inputs have seen their costs move up at a record pace in the past few weeks.

 

The ethanol industry is also concerned about the price and supply of corn.  Some have suggested that ethanol production be cut back to make sure there is enough corn for the livestock market, but Vilwock says that would also cause some serious problems, “Because we have nothing to replace ethanol with.”  He said MTBE was taken off the market as a gasoline additive because of cancer concerns, now gasoline makers have nothing to replace ethanol with as a fuel additive.  He said getting rid of the Renewable Fuel Standard (RFS), as some have suggested, is not a silver bullet that will solve the problem.

 

Purdue ag economist Chris Hurt says all Americans will be impacted by the drought either with high food prices or higher gas prices, or perhaps both.

 

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