The hottest summer since 1955 in Iowa and Illinois is eroding yield prospects for corn and soybean crops in the U.S., the largest grower and exporter.
Signs of diminished output appeared this week during a four-day, seven-state sampling of about 2,000 fields in the Midwest organized by the Professional Farmers of America, which will report its findings later today. A Bloomberg survey of 25 tour participants showed all expected the government to cut its corn-harvest forecasts and 21 predicted a reduction for soybeans.
Corn prices have jumped 24 percent since July 1 and soybeans touched a five-week high on Aug. 24 as crops in parts of the Midwest were damaged by more than 35 days of temperatures above 90 degrees Fahrenheit (32 degrees Celsius), government data show. Corn, the biggest U.S. crop, is the main ingredient in livestock feed and ethanol, a gasoline additive.
“Mother nature has proven once again to be a cruel temptress,” Peter Meyer, a former agricultural specialist for JPMorgan Chase & Co., said in an interview yesterday in Austin, Minnesota, after completing his fifth Pro Farmer tour. “2011 may go down as the year she destroyed both the cattle industry and the ethanol industry.”
Corn futures on the Chicago Board of Trade were little changed at $7.4325 a bushel and soybeans were steady at $13.935 a bushel by 10:27 a.m. in London.
Meyer, the publisher of Opening Print, a food and agriculture newsletter in New York, correctly forecast a smaller corn crop and rising prices after last year’s tour. Corn production may fall 6.5 percent below the government’s estimate, Meyer said.
The more than 100 farmers, analysts, agronomists, grain buyers and journalists who took field samples on this year’s tour reported corn yields below last year’s in Iowa, Illinois, Minnesota, Ohio, Nebraska, Indiana and South Dakota. Soybean-pod counts were also smaller in all those states except Ohio.
Iowa and Illinois, the two biggest U.S. corn- and soybean-growing states, had their hottest July since 1955, according to state climatology departments. Areas of western Iowa, central Illinois, southern Minnesota and western Indiana had a quarter of normal rainfall this month, said the National Weather Service.
The U.S. Department of Agriculture said Aug. 11 that corn production may total 12.914 billion bushels, 4.1 percent below its July estimate and still 3.8 percent more than last year. The national yield may average 153 bushels per acre, compared with 158.7 bushels estimated in July and 152.8 bushels a year earlier, the agency said.
‘Much, Much Worse’
“The crop tour is telling us what we already know, which is that the yields for soybeans and corn may be much, much worse than what the USDA said on Aug. 11,” Tim Hannagan, a grain-market analyst for PFG Best Inc., said by telephone from Chicago. “We had the fourth-hottest July in recorded history and very little rain. Something is wrong with this crop, which is what farmers have been telling us from the beginning.”
The government’s corn-crop estimate will be cut 10 percent by October, said Byron Jones, a 70-year-old farmer from Saybrook, Illinois, who participated in the Pro Farmer tour since 1993.
“The soybean crop is smaller than the USDA said this month because it was planted late,” Jones said in an interview yesterday while examining fields in Grundy County, Iowa. “There is still about 20 percent of the area in the heart of the Midwest that is too dry and that will hurt final yields.”
In Iowa, the tour estimated corn yields at 164.6 bushels an acre, based on 368 field samples. That’s 2.8 percent below the findings in the same area last year, and less than the USDA forecast of 177 bushels for the state this year. In Illinois, the tour estimated yields at 156 bushels an acre, 6.3 percent below last year and less than the USDA forecast of 170 bushels.
The government estimates U.S. soybean production may decline 8.2 percent this year to 3.056 billion bushels, with yields averaging 41.4 bushels per acre.
Crop-tour participants counted an average of 1,159.3 pods per 3-square feet in western Iowa, down 14 percent from the findings last year, when the state yielded 51 bushels per acre. The USDA projects an average state yield of 52 bushels this year.
Soybeans “still could see further problems,” Jerry Gidel, a market analyst for North American Risk Management Services Inc. in Chicago, said in a telephone interview. “Depending on what moisture comes in the next two or three weeks, that could have a huge impact on soybeans.”
Higher corn prices are increasing costs for companies including Sanderson Farms Inc., the fourth-largest U.S. chicken processor, which yesterday reported a third-quarter net loss of $55.7 million. The company’s cash-market corn costs were 85 percent higher in the third quarter than the same time a year earlier, while soybean-meal expenses rose 26 percent, Laurel, Mississippi-based Sanderson said in a statement.
“We remain subject to very challenging markets,” Chief Executive Officer Joe Sanderson said on a conference call. The U.S. harvest “might still not be large enough to satisfy the needs of corn users next year without price rationing.”
Denatured-ethanol futures are up 66 percent in the past year on the Chicago Board of Trade. U.S. inventories dropped to 17.6 million barrels as of Aug. 12, the lowest since January, before climbing to 18.243 million the next week, Energy Department data show.
About 57 percent of the corn crop was in good or excellent condition as of Aug. 21, compared with 60 percent a week earlier and 70 percent a year earlier, USDA data show. It was the lowest-rated crop for that time of year in six years. For soybeans, 59 percent got the top rating, down from 66 percent at the beginning of July and 64 percent a year earlier.
Worsening conditions in July and August reflect the extreme heat and increasing dryness in the Midwest, the largest growing region, said Kyle Tapley, an agricultural meteorologist for Rockville, Maryland-based MDA Information Systems Inc. Average temperatures in the Midwest were as much as 8 degrees Fahrenheit above normal in July, and farms from south-central Minnesota to Ohio got less than a third of normal rain since July 1, he said.
The corn-ear size is determined early in the plant’s life cycle, when Midwest flooding and cool temperatures stunted growth, said Tapley, who participated in this week’s tour and sees corn production falling to 12.223 billion bushels. Heat in July damaged reproduction, reducing the number of kernels on each ear. Soybeans probably won’t get the rain needed in the next 10 days to prevent further yield loss, he said in an interview yesterday.