U.S. Government Raises Estimates for Corn and Soybean Harvest, But Lasting Effects of Drought Still Loom

Although experts no longer fear the worst, farmers are feeling the lingering effects of the 2012 summer drought. (Christian Science Monitor)

The U.S. government predicts that the nation’s 2012 corn and soybean harvests will not be as low as previously predicted, although the effects of this year’s drought in the country’s top agricultural region are not yet over.

In a recent report on national crop production, the U.S. Department of Agriculture (USDA) forecasts a slight rise from October’s projections, with total corn production expected to hit 10.7 billion bushels and soybean production projected to reach 2.97 billion bushels. Even with the new projections, the drought is expected to cause deficits in 2012 U.S. corn and soybean production of 13 percent and 4 percent, respectively, over 2011.

This summer’s drought was centered in the Midwest, the heart of U.S. corn and soybean production. Because the United States is the world’s biggest exporter of the two crops, the plant-withering conditions caused soybean and corn prices to reach record highs worldwide, fueling fears over continued price increases. But rainfall late in the growing season has lessened the drought’s impact, allowing farmers to make up for some of the crop shortfall and bring prices down.

Analysts such as Mark Schultz, chief analyst at Northstar Commodity Investment Co., speculate that decreased demand for grains has also helped to soften the blow of global shortages. “Surging costs may have damped demand by makers of food, biofuel and livestock feed,” Schultz said in an interview with Bloomberg. “Given all the rhetoric about the rest of the world running out of food, it appears that supplies are adequate and that high prices may have slowed demand.”

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Yet not all is back to normal. Irrespective of recent rainfall or of demand compensating for decreased supply, the drought has still accounted for large crop losses and may have lasting effects. Corn yields for 2012 are expected to average 122.3 bushels per acre, down 24.9 bushels per acre from 2011. If these predictions prove accurate, they would represent the nation’s lowest corn output since 2006 and lowest average yield since 1995.

Meanwhile, the spike in corn and soybean prices poses a looming threat to meat production, the USDA predicts. Because corn and soybeans are major components of many livestock feeds, increases in their prices have made raising animals costlier. In the pork industry, this price hike has led many producers to slaughter sows normally used for breeding, creating a short-term jump in meat production but an anticipated shortage later in 2013.

Similarly, the price of beef is expected to rise considerably. With corn being the most widely used feed grain, the increase in its price is expected to send wholesale beef prices to $1.33 a pound in 2013, 16 percent higher than in 2011. In the wake of these shortages, some are predicting that poultry and grass-fed mutton will become common substitutes for pork and beef.

Whatever the final outcome of this year’s drought, it can serve as a reminder that future harvests of corn and soybeans—which are particularly susceptible to changes in temperature and moisture—will be increasingly vulnerable to climate shocks and fluctuations.

Andrew Alesbury | Nourishing the Planet | November 19, 2012

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