Corn Belt Drought Notes

North American Corn Belt Drought

Overview

  • The North American corn belt is experiencing a severe drought, impacting crop yields and potentially leading to increased food prices.

Impact on Corn Crops

  • Heat Wave: High temperatures are negatively affecting corn crops in states like Illinois.

  • Crop Biologist's Observation: Fred Below from the University of Illinois at Urbana-Champaign notes the adverse effects of the heat wave on corn growth.

  • Drought Conditions: The worst drought in 25 years is affecting the corn belt, stretching from Nebraska to southern Ontario.

  • Harvest Bust: Farmers anticipate a poor harvest due to the drought.

  • Corn Quality: Surviving corn has shriveled kernels, reducing its quality.

  • Price Increase: Maize prices have risen, reaching a record of US8perbushel.</p></li><li><p><strong>USDAForecast:</strong>TheU.S.DepartmentofAgriculturehascutitsharvestforecastby128 per bushel.</p></li><li><p><strong>USDA Forecast:</strong> The U.S. Department of Agriculture has cut its harvest forecast by 12%.</p></li><li><p><strong>Drought Zone:</strong> Three-quarters of U.S. corn-producing land is in a drought zone with minimal rainfall (as little as10 mmsinceearlyJune).</p></li><li><p><strong>IllinoisCropLoss:</strong>Approximatelyone−thirdofIllinois′corncropcouldbelost.</p></li><li><p><strong>CriticalDevelopmentStage:</strong>Theheatwaveoccurredduringacrucialpollinationperiod,damagingthepotentialkernelcount.</p></li></ul><h4id="a53836ec−fc02−4d0b−8745−5bc5a353966b"data−toc−id="a53836ec−fc02−4d0b−8745−5bc5a353966b"collapsed="false"seolevelmigrated="true">BroaderEconomicImpact</h4><ul><li><p><strong>FoodSupply:</strong>CornisastapleintheWesterndiet,usedincereals,softdrinks,andlivestockfeed.</p></li><li><p><strong>PriceImpact:</strong>Increasedcornpriceswillaffectvariousfoodproductsandindustries.</p></li><li><p><strong>OntarioFarms:</strong>FarmersinOntarioarestrugglingtosavetheirsweetcorncrops.</p></li><li><p><strong>IrrigationEfforts:</strong>Farmsareusingirrigationtokeepcropsalive,butwaterresourcesarelimited.</p></li><li><p><strong>PrecipitationLevels:</strong>Lowprecipitationlevelshavebeenrecorded,exacerbatingthedrought.</p></li><li><p><strong>YieldReduction:</strong>Farmersexpectadecreaseincropyieldsduetothedrought.</p></li></ul><h4id="2ac2c02b−41fc−4972−abc2−13824afb0857"data−toc−id="2ac2c02b−41fc−4972−abc2−13824afb0857"collapsed="false"seolevelmigrated="true">EconomicAnalysisandDebate</h4><ul><li><p><strong>USsince early June).</p></li><li><p><strong>Illinois Crop Loss:</strong> Approximately one-third of Illinois' corn crop could be lost.</p></li><li><p><strong>Critical Development Stage:</strong> The heat wave occurred during a crucial pollination period, damaging the potential kernel count.</p></li></ul><h4 id="a53836ec-fc02-4d0b-8745-5bc5a353966b" data-toc-id="a53836ec-fc02-4d0b-8745-5bc5a353966b" collapsed="false" seolevelmigrated="true">Broader Economic Impact</h4><ul><li><p><strong>Food Supply:</strong> Corn is a staple in the Western diet, used in cereals, soft drinks, and livestock feed.</p></li><li><p><strong>Price Impact:</strong> Increased corn prices will affect various food products and industries.</p></li><li><p><strong>Ontario Farms:</strong> Farmers in Ontario are struggling to save their sweet corn crops.</p></li><li><p><strong>Irrigation Efforts:</strong> Farms are using irrigation to keep crops alive, but water resources are limited.</p></li><li><p><strong>Precipitation Levels:</strong> Low precipitation levels have been recorded, exacerbating the drought.</p></li><li><p><strong>Yield Reduction:</strong> Farmers expect a decrease in crop yields due to the drought.</p></li></ul><h4 id="2ac2c02b-41fc-4972-abc2-13824afb0857" data-toc-id="2ac2c02b-41fc-4972-abc2-13824afb0857" collapsed="false" seolevelmigrated="true">Economic Analysis and Debate</h4><ul><li><p><strong>US50 Billion Event: Michael Swanson from Wells Fargo & Co. estimates the shortage to be a US$$50 billion event for the U.S. economy.

  • Price Spike: Corn prices have increased significantly (46%) since mid-June.

  • Consumer Impact: Lower-income consumers will be significantly affected by higher corn prices.

  • Ethanol Production: Reduced corn usage for ethanol production may offset some price pressures.

  • World Economy: A neutral global economy could limit demand for meat and dairy products.

  • Consumer Behavior: Consumers may switch to cheaper protein sources like chicken or pork if beef prices rise.

  • Market Volatility: The drought highlights the increasing volatility in agricultural markets due to unpredictable climate conditions.

  • Past Losses: Some farmers have experienced crop losses in previous seasons due to excessive rain, compounding their challenges.

Key Details

  • Subjects: Food prices, agriculture, agricultural commodities, drought, rain, farms, corn, ethanol, global economy.

  • Industry: Corn Farming (11115).

  • Publication: Maclean's, July 18, 2012.