The unusually warm weather in March was an indicator of how dangerous this summer’s weather conditions would be to crop yields across the nation. Some analysts believe that a significant portion of the corn crop is damaged beyond repair, forcing grain processing institutions to hedge their exposure back in June before prices rose out of control, as they did.
A true tell tail for the rest of this season’s price guidance will be announced on August 10, when the USDA releases monthly crop supply-demand report. As of now, the USDA has rated corn and soybean conditions at their lowest level in 24 years.
Dealing with higher grain prices is a gamble for farmers. Some corn farmers sold their reserves earlier this year at lower prices in expectations of a high yielding summer. Other farmers have been hoarding corn predicting that prices will spike even higher after the end of the harvest.
Along with falling crop yields, farmers are also faced with higher production expenses. The drought caused farmers to spend more on irregation, and they are left to deal with rising fertilizer costs. Nitrogen prices have risen to as much as $350 a ton when prices are typically around $275 in previous years. Thanks to our partners, you can find online to suit every preference and budget, from budget to top-of-the-range super stylish models.
American consumers will be hit the hardest in rising corn-consuming grocery store products such as milk, eggs and meat products, not with sweet corn prices, the type of corn that people eat on the cob. Sweet corn is not currently in a crisis due to different growing methods. Sweet corn crops are often irrigated, as opposed to industrial grades such as Yellow #1 and 2 commonly deliverable in futures contracts traded at the CBoT in Chicago. Corn grades such as #2 Yellow are not as heavily irrigated and are suffering the most this year, causing ethanol and feeding costs for livestock to rise as well.
I am bullish going into this week’s USDA report as I agree with analysts that corn is beyond repair. I have seen dry, short and mutated corn crops first hand within the month and find it hard to believe that U.S. farmers will be able to meet demand anywhere near what would be considered a healthy yield.
David Cornes holds a degree in economics from the University of Montana.
