In this file:
Farmers across the country begin throwing in the towel.
Vilsack: Three-Prong Targeting for Disaster Aid
Farmers Destroy Corn with Permission from Crop Insurance
Farmers across the country begin throwing in the towel.
Tom Bechman - Farm Futures
Published: Jul 11, 2012
Farmers are mowing down drought stricken corn fields, especially in hard hit areas such as Illinois and Indiana, according to an Associated Press report.
David Kellerman, Dubois, Illinois, says he has had less than an inch of rain since mid-April in his area in the southern part of the state. This week he and the farmer he works with cut and baled his corn fields to use as forage for their cattle, according to the AP report.
Indiana is the state where corn is affected the most by drought and heat. Matt Johnson's popcorn fields in Redkey, Ind., have been burning up by the day, and he expects his insurance adjuster to tell him to mow them over if no rain comes by next month.
"It's pretty sad," Johnson told the AP. "Everything's just so short, so small. We haven't mowed our yard since sometime in May. We didn't even get an inch of rain in June and haven't gotten an inch yet in July."
Chris Hurt, Purdue University ag economist, confirmed that for the week ending July 8, after the sizzling Fourth of July heat across most of the Corn Belt, that only 12% of Indiana's corn crop was rated good or excellent. More than 60% was poor to very poor, a number overshadowed at this point in the season only by the drought of 1988, when 90% of Indiana's corn was poor or very poor for the same reporting period.
That year the damage bottomed out at that level, and conditions improved slightly with rain in parts of the Corn Belt during late July. Stories of terrible corn and deterioration of the crop are emerging from other states as well. Iowa went from nearly two-thirds of the state rated as good to excellent for corn on July 1, to less than half rated good to excellent on July 8. Decreases in condition were also reported in Nebraska, Illinois and Ohio.
Now comes word that farmers in Iowa are asking crop adjustors if they can mow down corn...
USDA Adjusts Disaster Relief
Vilsack: Three-Prong Targeting for Disaster Aid
By Emily Garnett, DTN News Intern
DTN/The Progressive Farmer - Wed Jul 11, 2012 02:16 PM CDT
OMAHA (DTN) -- Agriculture Secretary Tom Vilsack announced a three-pronged adjustment to disaster relief programs today, which will target disaster designations, emergency loan rates, and rental payments for Conservation Reserve Program acres used for emergency haying and grazing.
The announcement was part of an effort to assist drought-stricken producers in light of the fact that drought assistance programs from the 2008 Farm Bill expired in September, and the 2012 farm bill is still mired in the House.
Effective immediately, Vilsack announced, counties labeled by the U.S. Drought Monitor as in a severe drought for eight consecutive growing-season weeks, or in an extreme drought for any amount of time in the growing season, will automatically receive a secretarial designation as disaster areas. On Thursday, July 12, county and state emergency boards will also be able to bypass governor initiations of the disaster designation and submit these requests directly to the USDA. However, counties that don't now automatically qualify for the program will still have to prove a 30% loss in at least one crop. These two measures, will "streamline the disaster designation process," Vilsack said.
A USDA press release estimated the new measures will reduce the time it takes for a county to designated a disaster by up to 40%.
Under these measures, 1,016 primary counties in 26 states will immediately receive secretarial designations as disaster areas on July 12. "This is the largest single secretarial designation in the history of our program," Vilsack said.
Secretarial disaster county designations allow affected producers to apply for the Farm Service Agency's Emergency Farm Loan program. However, the fixed interest rate of 3.75% on emergency loans has surpassed the operating loan rate for many years now, and the loan program has been chronically underused, Vilsack acknowledged. Effective July 15, he announced, the emergency loan program will use a floating loan rate, which will be 1% lower than the operating loan rate. At this point, the floating rate for emergency loans will be 2.25%.
"We estimate and expect that roughly $38 to $39 million may be available within this program that could be used by producers who are impacted and affected by disasters like the drought that we are currently experiencing," Vilsack said.
Livestock producers using CRP acres in the Emergency Haying and Grazing program will get a financial break, Vilsack announced. Effective immediately, he said, instead of losing 25% of their annual CRP rental payments when they turn that land over for much-needed forage, producers will only lose 10%.
Vilsack firmly rebutted any suggestions that the ethanol mandates from the Renewable Fuel Standards would be downgraded to reduce corn demand in light of the USDA's latest reduced corn yield estimates...
$10 Corn and $20 Soybeans to Pit Food Against Fuel
By: Fran Howard - AgWeb
July 12, 2012
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...
US pork sector close to financial disaster
Pig Progress // 12 Jul 2012
Drought and the impact on feed prices may be on the verge of creating a financial disaster for the US pork industry and other livestock.
The crop stress that began in Indiana and Illinois is now spreading further to the west. Although much of the media attention has been focused on crop producers, who face large yield losses, livestock producers may ultimately fare even worse.
“Crop producers have the potential for two compensating income streams when yields are low,” says Purdue University Extension economist Chris Hurt.
“The first is what is called the ‘natural hedge.’ When yields are low across a broad geographic area, then prices generally rise. This is especially true when stocks-to-use ratios are tight as they are now. Under these conditions a 10% reduction in national yield is offset by a rise in prices that is substantially more than 10%.
“This means that revenues tend to be less negatively affected by yield losses. Many crop acres have some type of crop insurance that can help cushion the financial blow of low yields. While these conditions hold on average, there will be considerable ranges in how individual farm families are impacted.”
No income protection
Hurt says pork producers tend not to have any form of income protection against higher feed prices in the short run.
“With the weather market in just three weeks, December 2012 corn futures have risen by $2.25 per bushel and December meal futures are up $100 per ton,” Hurt says.
“These represent a 45% increase for corn and a 28% increase for soybean meal. These higher feed prices have to be absorbed by the animal industry, causing a collapse in financial margins.”
Because higher feed costs cannot be passed on to the consumer, there is no natural hedge for the livestock and poultry industry in the short run.
“The collapse of margins results in financial losses, which cause discouragement among animal producers,” Hurt says. “This will result in selling at lighter weights and the beginning of liquidation of some of the breeding herds and flocks immediately, but especially this fall.
“Unfortunately, the increased slaughter this summer and fall will tend to increase production and may cause some downward pressure on animal prices...
Withering Corn Crop Feeds Global Concerns
By: Roy Leidahl - AgWeb
July 11, 2012
Corn futures have soared, crop condition ratings have dropped, and the world is hearing about risks of U.S. drought driving food prices higher.
Voice of America warned yesterday that world food prices likely will spike for the third time in five years, noting that price surges in 2007-08 and 2010-11 "triggered riots and social instability in dozens of countries around the world."
The Sydney Morning Telegraph said Australian consumers can expect to pay more for many foods in response to Midwestern U.S. crop damage and reported "demand for Australian grain is surging, pushing the price up for local users too."
And in Europe, analysts at Offre & Demande Agricole said deteriorating prospects for U.S. corn plus reduced Black Sea grain production have driven up prices ahead of the July 11 USDA reports on supply and demand, and may keep pushing prices higher...
Drought forces corn and cattle decisions
July 11, 2012 By Julie Harker - Brownfield
The drought’s effect on crops in Missouri and other states has led to tough decisions. Missouri FSA Chief Loan Officer Dan Gieseke says some farmers are chopping their corn for silage but that comes with risks, “Some farmers are simply mowing it and trying to gain some feed value there but there are some dangers in that especially the possibility of accumulated nitrates in the stalk of the corn crop which can be quite toxic to cattle.”
With virtually no hay available in Missouri and pastures burning up, he says a lot of cattle are going to market.
“There’s been increased sales at the markets and there have been some markets that have scheduled some additional sale days. You know, if they normally have just a Tuesday sale, they’re doing a Tuesday and a Thursday, to accommodate all the people that are trying to sell cattle.”
He adds that a lot of producers are selling off their older cows...
Climate report warns of more extreme weather
By Flint Duxfield - ABC Rural (AU)
Climate change is increasing the likelihood of more extreme weather events like the floods that swept eastern Australia in 2011.
That's the conclusion of the latest State of the Climate Report prepared by almost 400 scientists from 48 countries.
Senior meteorologist at the South Australian Bureau of Meteorology, Darren Ray, says droughts like those experienced in the United States last year will also become more common due to climate change.
"The strength of that event was made 20 times more likely with the background temperature rises that we've seen over the past few decades than back in the 1960s," he said.
"That warming that we've seen over the past few decades has made an event of that size much more likely now than it would have been without background warming."
Darren Ray said current climate data suggests an El Nino weather pattern is likely to emerge in coming months, resulting in drier conditions across eastern and southern Australia.
article, plus audio report
DJ U.S. CORN: Rising On Worries About Drought, Lower Crop Yield
Owen Fletcher - DJ/Agriculture.com - Jul 12, 2012
--U.S. corn futures trading higher on worries about drought, lower crop yield
--Goldman Sachs hikes corn price forecast
--Concerns still remain that high prices could be curbing corn demand
CHICAGO--U.S. corn futures are trading higher Thursday morning, as traders remain worried about tighter supplies due to crop damage from a Midwest drought.
In electronic trading, Chicago Board of Trade futures for July delivery, thinly traded ahead of their expiration Friday, are up 15 1/4 cents or 2.0% at $7.66 a bushel. December corn is up 13 1/4 cents or 1.9% at $7.17 1/4 a bushel.
Corn futures have surged in the last few weeks as hot, dry weather has deteriorated crop conditions in the Midwest. Futures fell on Wednesday on worries about slowing demand due to the higher price levels, and as weather forecasts turned wetter.
Traders on Thursday are refocusing on the possibility of continued tight supplies, analysts said. In a monthly supply-and-demand report Wednesday, the U.S. Department of Agriculture pared its estimate for this fall's corn yield by a higher-than-expected 12% from its forecast last month, to 146 bushels an acre from 166 bushels an acre.
The crop's yield potential could still fall further, analysts say.
"Such a hefty reduction, potentially unprecedented in nature, is likely, in our view, to be followed by further, albeit more modest, yield declines in the August" report, Barclays analysts said in a research note.
Goldman Sachs said Thursday it had increased its corn price forecast for the next three, six and 12 months to $6.90 a bushel, from $6.30, as the bank lowered its estimated yield for the U.S. due to the Midwest drought. The declining conditions now point to a corn yield of 143.5 bushels an acre, it said.
U.S. weather forecasts aren't favorable enough to ease worries about crop conditions. For the next several days, the National Weather Service forecasts high temperatures in the high 80s and low to mid 90s in Iowa, Illino is and Indiana, while rains are also expected to come through the region.
For mid-to-late next week, the NWS forecasts above-average chances of rain in western Iowa, Illinois, Indiana and Ohio, all regions that have faced significant dryness. But it also forecasts more above-average temperatures across the Midwest in that time frame...
DJ U.S. SOY: Futures Rebound; Crop Fears Underpin Prices
Andrew Johnson Jr. - DJ/Agriculture.com - July 12, 2012
--Supportive fundamentals from declining crop prospects and tightening supply forecasts remain enough of a concern to offset potential technical weakness
--"Weather is still trumping everything in the market"
--Weekly soybean export sales totaled 759,200 metric tons
CHICAGO--U.S. soybean futures are trading higher Thursday, rebounding from Wednesday's setback, as traders factor in the risk of further U.S. crop deterioration.
Chicago Board of Trade July soybeans are 4 3/4 cents, or 0.3%, higher at $16.27 3/4 a bushel. The new-crop CBOT November contract is trading up 6 1/2 cents, or 0.4%, at $15.29 a bushel.
Supportive fundamentals from declining crop prospects and tightening supply forecasts remain enough of a concern to offset potential technical weakness from Wednesday's profit-taking declines.
A drier bias for the U.S. Corn Belt has not shifted, a feature expected to keep prices supported.
"Weather is still trumping everything in the market," said Don Roose, president of advisory and brokerage firm U.S. Commodities in West Des Moines, Iowa.
Some real heat is forecast to return to the Corn Belt for the next two weeks, leading to potentially continued crop deterioration, Mr. Roose said.
The threat of future yield reductions by government forecasters if a drought continues to plague the U.S. Corn Belt is expected to continue to drive price direction. Traders still acknowledge U.S. soybean production has no room for error in 2012, with U.S. inventories already forecast to dwindle to precariously tight levels by 2013.
The central and western parts of the Corn Belt have the biggest concern about the weather pattern approaching, meteorologist at Freese-Notis Weather in Des Moines, Iowa, said in a morning forecast. "There is certainly heat in the forecast, especially for next week when we fully expect to see some places reach 100 degrees or higher," Freese-Notis said in the forecast.
Yet soy futures are in a caution zone, with buyers on alert after contracts produced key reversals on technical charts Wednesday.
Typically, when futures post a huge outside reversal on bullish news, like Wednesday's government crop forecasts, a significant top in prices has occurred, said Brian Hoops, president of brokerage Midwest Market Solutions in Yankton, S.D...
DJ U.S. WHEAT: Rising on Higher Corn Prices, Tighter Supply Worries
Owen Fletcher - DJ/Agriculture.com - July 12, 2012
--U.S. wheat futures trading up on higher corn prices, worries wheat supplies could tighten
--Analysts warn somewhat-tighter wheat supplies don't justify such strong recent price gains
--Wheat could still move higher as it continues to follow corn price trends
CHICAGO--U.S. wheat futures are trading higher Thursday morning, boosted by higher corn prices and worries that wheat supplies could tighten.
In electronic trading, Chicago Board of Trade futures for September delivery are up eight cents, or 1.0%, at $8.34 1/4 a bushel. Kansas City Board of Trade September wheat is up 6 3/4 cents at $8.37 3/4 a bushel. MGEX September wheat is up 11 1/4 cents at $9.31 1/4 a bushel.
Corn futures are rising Thursday due to continued worries about tighter supplies as a Midwest drought cuts into the corn crop's potential. Wheat is rising as well because higher corn prices could boost demand for wheat to replace corn in animal feed.
"A rising tide lifts all boats," said Jason Britt, president of brokerage Central States Commodities in Kansas City, Mo.
While wheat is likely to continue following trends in corn prices and could rise further if corn does as well, wheat futures may have downside risk, as a large part of their recent gains has been based on corn prices rather than the supply-demand outlook for wheat itself, traders said. Analysts said world wheat supplies remain ample.
"For wheat, that is a market to me that continues to defy gravity a little bit," Mr. Britt said. "From a demand standpoint, a carryout standpoint, wheat feels to me that it's on the high end of the range."
Some of wheat's gains in the last few weeks have been based on a dimmer production outlook in major overseas growing regions such as the Black Sea area and Australia. Worries about tighter supplies may be helping to raise futures Thursday.
In a monthly supply-and-demand report, the U.S. Department of Agriculture Thursday forecast domestic-wheat inventories at the end of the 2012-13 marketing year at 664 million bushels, below analysts' average expectation of 725 million. The USDA pegged total U.S. wheat production this year at 2.22 billion bushels, slightly below expectations for 2.25 billion...