The average corn yield in the United States this year could drop to as low as 115 bu./acre and the soybean yield could drop below 37 bu./acre unless it starts raining soon and continues to rain hard every week across a wide swath of the central Corn Belt. If yield damage is as extensive or worse then analysts think, corn prices could break through $10/bushel and soybean prices could pierce $20/bushel.
Some of the driest areas of the Corn Belt would need as much as 20 inches of rain to stabilize the corn crop, says Dan Basse, economist and president of AgResource Company, Chicago. Basse was a commentator on a simulcast for the CME Group Tuesday, July 10.
"We are seeing corn plants in the field that are literally dying," says Basse. The plants can’t find soil moisture and are cutting back on kernel formation. "Most farmers in the worst hit areas are fearing 40 to 80% yield losses," he says.
Basse and others are not quite that pessimistic on the national corn crop—at least not yet. "The loss of crop is the largest I’ve ever seen in such a short period of time," says Basse. A 10% overall yield loss would put the U.S. average yield at 141 to 144 bu./acre, which equates to overall production of less than 12 billion bushels.
Corn abandonment: 2 million to 11 million acres
In two previous droughts, yield losses were greater than 10%. Corn yield dropped 30% below trend yield in 1988 and 20% below trend in 1983. A 20% yield decline would put the U.S. average yield between 130 and 132 bu./acre.
"That is a catastrophe," says Basse. On top of the yield loss, Basse expects 2 million to 3 million acres of corn to be abandoned. "We are finding fields in Indiana and Illinois that will yield nothing," he says.
The potential for soybean yield has also dropped dramatically, but plentiful and frequent rains still could still help the soybean crop. U.S. and world soybean stocks, however, are very tight due in part to last year’s drought in South America, and any yield loss would be problematic. "Back-to-back drought in soybean production regions is unprecedented," Basse notes. "Corn and soybean prices will stay at extremely high levels for the next several months."
Basse says that $8-9/bu. corn and $17-19/bu. beans are likely unless the weather pattern changes in time to help Iowa’s crops, and he hasn’t ruled out corn prices above $10/bu. and bean prices higher than $20/bu. if conditions deteriorate much further.
Terry Roggensack, co-owner and founder of the Hightower Report, agrees that the nation’s corn and soybean crops are on the verge of becoming complete catastrophes "Twelve percent of the corn crop across the country is in very poor condition," notes Roggensack, who was also commentator on the CME Group’s simulcast. "Crops rated very poor are those close to being plowed under, and 12% of the crop is the equivalent of 11 million acres."
Recent soil moisture ratings are some of the lowest ever and the temperatures during the corn pollination period were some of the highest ever. "It only takes one of those to cause stress to the corn crop," Roggensack says. "If conditions stabilize we are looking at a 140 bu./acre yield," he says.
The dramatic drop in corn and soybean yields will soon turn into a global food issue. "The markets will not top until we see potential for good rains that can save the soybean crop from a becoming a total disaster and stabilize the corn crop," Roggensack says. Potential average yields between 114 and 140 bu./acre for corn are reasonable using historical studies, he says.
Falling corn and soybean yields will force more feeding of wheat, which could tighten world food supplies further, particularly if a developing El Nino strengthens, causing drought in the Southern Hemisphere’s wheat-growing regions.
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Read more news about the 2012 drought and its agronomic and grain price impacts.