2012 Drought in Perspective
I don't know if this is a result of the severity of the drought being overblown or of the continued improvement of farming technology, or a bit of both. Here is the recent data on 2012:
"As anticipated, lower projected production for both corn and soybeans was reported this month," said AFBF economist Todd Davis. "It will be some time before the long-term effects of the 2012 drought are fully played out. But it appears likely that continued strong worldwide demand for corn and soybeans will lead to higher projected prices."
USDA forecast corn production at 10.7 billion bushels. The average yield for corn was forecast at 122.8 bushels per acre this year, down slightly from the August prediction. Once harvest is complete, if the average corn yield comes in at 122.8 bushels per acre, it would be the smallest average yield since 2003.
I am glad I don't deal day to day with grain yield numbers, because every source I checked seems to be 3-5% off the other sources for historic numbers. There must be some definitional issues I don't understand with acres vs. net acres. But taking 2012 equal to to 2003, which is the worst-case way to interpret the above statement, we get this chart:
So, down 15-20% from the last several years, which is not good, but a number that still would be nearly an all-time high until about 2000. Even at this lower number, US yields will be more than twice the corn yield per acre in the rest of the world. Disasters are relative, I suppose, but this is a long way from the 1930's.
sean2829:
I have also heard that the American corn crop is the smallest in 6 years and the global corn crop is the second largest ever. They just don't make crop disasters like they used to.
September 17, 2012, 1:30 pmHerman:
Obviously, it is President Bush's fault.
September 17, 2012, 1:44 pmmark2:
If the global crop is so big, why would prices be going up so much? Seems like the US would just export less because the world is filled with grain.
September 17, 2012, 2:20 pmMingoV:
The regional drought would not have been a big problem if it weren't for the skewing of demand.
1. Federal government mandates (again) that all gasoline must contain 10% ethanol.
2. Almost all fuel ethanol comes from corn.
3. Even if corn production falls, the same amount of corn (approximately 40% of last year's corn crop) must go into gasohol. (Economists call that inelastic demand.) This drove corn prices from $3 to $8 a bushel. The increased cost of corn-derived ethanol helped 'fuel' the recent increases in gasoline prices.
4. Competition for the remaining corn is high, further driving up prices.
5. Anything else that needs corn (such as beef) has to pay very high prices. Cattle ranchers will be slaughtering many of their cows this fall because they won't be able to feed them over the winter. Beef prices will skyrocket next year.
Thus, we can thank the Obama administration for choosing gasohol as the 'best' method for reducing our dependence on Mideast oil. Tapping into our own untouched oil resources just didn't fit his 'green' USA plan. Neither does eliminating the gasohol requirement. After all, it's for our own good.
September 17, 2012, 2:20 pmsean2829:
Corn is very bulky and quite expensive to ship so the corn is likely used fairly close to where it's grown. I've read that it costs on the order of a dollar a bushel to ship in bulk, give or take based on the distance. With 40% of the domestic crop diverted to ethanol production, there is substantially more corn planted and this demand has only been in place about 5 years now. So world wide prices are up because demand is up but I also think corn prices in places like Argentina are a dollar or so lower than in the US. I think there is even a bit of corn being imported into the Southeast.
September 17, 2012, 4:53 pmmark2:
Actually it all has to come from corn because there is a renewable side to the mandate. It used to be added as an oxygenate, so older cars would not pollute as much, but once the renewable mandate went in, it could only be produced from Corn or cellulose in a process which does not exit. In fact
Celanese Corp wants to produce ethanol from Natural Gas, but is stymied because of the renewable rule, so they are limited to producing for paints and solvents, even though their process makes much purer fuel for much less money.
More sadness is that even for the CO2 zealots the Celanese process makes fuel which creates less of a CO2 footprint than corn or regular gasoline.
http://www.chron.com/business/energy/article/Incentives-sought-for-ethanol-made-from-natural-1597659.php
September 17, 2012, 8:25 pmmark2:
Industrial corn accounts for 11% of all US agricultural exports. That is huge.
http://www.ers.usda.gov/topics/crops/corn/trade.aspx
They load in on these huge barges and send it down the Mississippi. I learned a few things in the four years I lived in Iowa.
I would guess the farmers have options on the corn so have to send it - but I imagine they could purchase a contract elsewhere to substitute for local production of corn.
September 17, 2012, 8:31 pmmark2:
Oh, much (most) of our corn export is shipped to Asia.
September 17, 2012, 8:43 pmMatt M:
Couple things to clarify here. Coyote, the issue with acres is that you have two numbers. Planted acres and harvested acres. These numbers can change several times during the year from various USDA report. Some corn (roughly 8%) usually is for silage. The rest is harvested for grain. That is what makes the numbers strange because you have planted, harvested, and yield. 3 moving variables. USDA puts out reports all through the year with the final in January, but then can revise. That is why you may be seeing different final yield numbers.
September 18, 2012, 6:54 amI agree with your premise that US improvements in ag technological have driven yields far better than other parts of the world. Hybrids now allow for better weed prevention, higher plant poulations and less water. So that is good.
I won't go in to the ethanol, but a lot of misinformation on that one. 30% of ethanol is turned into Dried Distillers Grains, which goes to feed. Also, biggest user of corn is now poultry, not cattle, so that is something to note. Corn prices will affect beef and hog slaughter, but also two years of poor pasture production due to hot temps and drought is not helping. I am not a big proponent of ethanol, but it is not as bad as people say. It does create dislocations in the marketplace whenever the gov interferes, but remember that ethanol is now 8% of the motor fuel supply. Remove that and corn prices fall, but gasoline rises as well.
Someone asked about world production and US production. The key number to look at with most agricultural commodities is ending-stocks to use. This is left over supply divided by usage. Yes US production is still very high, but usage is high as well. Same in the world balance sheet. Past two years have seen lowest stocks to use since 95 and 2nd/3rd lowest ever. Lowest world ending stocks-to use since at least 82.
mark2:
The government won't even allow non-corn sources of ethanol into the fuel. Companies want to produce it out of the overabundance of natural gas that we have now, but NG is not considered renewable - even though considerable NG energy is used in the production of corn ethanol.
September 18, 2012, 5:29 pmAnInquirer:
One of my greatest concerns is that the weather / climate might
September 18, 2012, 8:25 pmsometime get as bad as it has been in the past! Imagine what the media and
activists would be doing if we had crop conditions like we had in the 1930s. Or
tornadoes like we had in the 1950s! Or if three hurricanes hit one U.S. city in
one year! In all likelihood, sometime in the future, it will be as bad as it
has been in the past. Will there be enough cool heads for common sense to
reign?
DA:
Actually, you can thank president Bush (and the pertinent legislators): the Renewable Fuel Standard was passed in 2005 and expanded 2007. http://www.epa.gov/otaq/fuels/renewablefuels/index.htm
September 24, 2012, 4:39 pm