Iowa's Devastating Derecho Damage May Not Make Big Dent in Corn Supply

02:48PM Aug 14, 2020
Derecho Damage
An aerial view shows the derecho damage in Lowden, Iowa, with grain bins tangled and corn fields flattened by 100 mph winds.
( Mike Byers )

Eastern Iowa was the bright spot for Iowa’s corn crop this year. The crop got off to a vigorous start and much of the region saw ample moisture and temperatures for the bulk of the summer. That all changed in a matter of minutes when the derecho blew through, with corn field after corn field flattened by winds topping 100 mph.

Early estimates from Iowa’s Governor’s office puts crop damage at 10 million acres, with updated estimates Friday coming in even higher than that. While the damage is largely unknown, Jarod Creed of JC Marketing Services says 10 million acres of crop damage may be a stretch.

“I’m trying to break it down from looking at crop districts within the state of Iowa,” says Creed, who also lives in eastern Iowa. “Des Moines lies in District 50. East Central Iowa is in District 60. The combination of those two are going to have somewhere between 7 to 8 million acres of corn and beans combined.”

Creed says the assumption today is there is much more damage to the corn acres than soybean acres at this point. So, even if you assumed half of those acres were planted in corn, the damage may be even less than that.

“If you take half of the area, or 50% of those two districts were affected - not necessarily damaged but affected  - and then throwing out a wild guess of 25% to 33% yield reduction, it gets you somewhere around a 150 million bushels decrease in production,” says Creed. I think the biggest question mark moving forward is ‘Will there be any abandonment of some of those acres?’

Peter Meyer of S&P Global Platts also acknowledged the devastation this week, as farmers and Iowa residents rush to clean up from the storm. However, he thinks the damage won’t be enough to significantly change the corn supply side of the balance sheet.

“Jarod's point is that he thinks that there might be 150 million bushels lost, we’re [S&P Global Platts] a little bit more conservative in that we'd be around 100 million bushels,” says Meyer. “What you have to remember is that in the August report, the World Board raised feed and  residual demand by 75 million bushels. Now in our opinion, feed and residual demand is capped, as is ethanol demand, at that 5.2 number, which is a very dangerous number in our opinion. So, right away they can take 75 million bushels back from the feed and residual number, and if Jarod is right, then you have a 75-million-bushel impact to the bottom line. If I'm right, you have a 25-million-bushel impact to the bottom line. Either way, it's really not going to make that big of a difference.”

Creed says the biggest impact may not be to corn prices, but to local farmers looking for grain storage this fall.

“That damage is going to have a heck of a lot more of a local impact on logistics on grain, rather than a national perspective,” he adds.

“The other thing we have to remember is the World Board is using a 0.7 coefficient,” adds Meyer. “They did in July, and they did it August, as well. So if we were to lose 100 million bushels or 150 million bushels in supply, we're going to lose 105 million bushels of demand. That's just the way it works. These are not static numbers. These are dynamic numbers. And the world board continues, as the production level moves up in corn, they will add 70% of that to the to the bottom line they added 67% of the demand side in the August report in July, they added 70%. If it goes the other way, they're going to take it away as just as quickly. “

All Eyes on Pro Farmer Crop Tour

Both Meyer and Creed are setting out on the Pro Farmer Midwest Crop Tour next week. Both say Iowa was already a key state in determining final production this year, but the recent damage this week, it will make the Crop Tour findings even more essential.

“I want to see what the damage looks like,” says Meyer. “I think there is an issue in the Western Corn Belt. We've gone from a dryness issue in western Iowa, to a wind damage issue now in eastern Iowa. It's going to be very interesting.”

While the tour this year is following the same routes and methodology for gathering the data, the evening meetings are going virtual due to COIVD-19 restrictions. Meyer says those evening meetings can prove to be valuable to crop watchers, especially when it comes to hearing from farmers regarding their plans for harvesting the damaged crop.

“What I really look forward to is the interaction with farmers,” he says. “Farmers will tell you if they have hail insurance or if they have wind insurance and if they are going to go in and get the crop and harvest it one way. That information is not going to be available to us given the limited interaction we're going to have with farmers this year, and that's a shame, because it would have been a year we would have been able to really get some anecdotal information.”

Scouts like Meyer and Creed won’t just get a highway view of the damage; scouts will enter into fields to measure just how widespread the damage is. Pro Farmer says after setting out so many paces into fields, if the corn is snapped, then the yield will be counted as a “0”, but if the corn stalks or just leaning or still standing, those stalks will be counted for yield.

“I would say the perception of Pro Farmer Crop Tour  has changed drastically over the last 30 days,” adds Creed. “During the growing season the majority of Iowa was in tip top shape, and slowly but surely, you've seen a build of yield potential in the surrounding states, especially Minnesota and Nebraska coming on strong to the finish. And now South Dakota is forecasting another record. We're going be looking at a mixed bag as you travel through good parts of South Dakota, struggling parts of Nebraska, really good part of  irrigated land in Nebraska, then over to a dry western Iowa, green snap in  Eastern Iowa and then a garden spot in southern Minnesota.”

The Pro Farmer Crop tour evening meetings are open to everyone this year, as the event is going virtual. Sign up here and tune in each night to hear first-hand from the Pro Farm Crop Tour scouts and tour leads to not only ear findings, but first-hand reports of what they saw on tour each day.

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