August 11, 2012

Drought Forces USDA To Again Lower Corn Production Estimates

redOrbit Staff & Wire Reports - Your Universe Online

The U.S. Department of Agriculture (USDA) has once again reduced the estimated corn production from American farmers as the country's farming industry continues to struggle amid the worst drought conditions in fifty years, various media outlets reported on Friday.

According to Ricardo Lopez of the Los Angeles Times, the lack of precipitation in the Midwest region of the nation has forced the USDA to lower its estimate for the corn crop by nearly 17% while increasing the upper end of its price forecast to nearly $9 per bushel (an increase of 39%).

The total production is expected to stand at 10.8 billion bushels for the year, which would make the 2012 yield the lowest in six years, according to Jim Suhr of the Associated Press (AP).

Furthermore, Reuters reporter Charles Abbott said that the yield is predicted to drop 13% from 2011, and Lopez reported that the estimated yield of 123.4 bushels per acre would be the lowest since 1995. Those estimates are based on initial samples from "parched, scorched fields" in the US, Abbott added.

"The U.S. farm belt has been ravaged by the most stifling drought since the 1950s, which intensified when the country's contiguous 48 states endured the hottest July on record last month," the AFP's Paul Handley explained. "While weather forecasters are predicting a cooling of temperatures across the midwest in the next week, it is unlikely to reverse those numbers as most of the crops are already maturing."

Handley added that the USDA has rated 50% of the country's corn crop as either poor or very poor, an increase of 34% from last year and 12% from a month ago. Following the agriculture department's announcement, corn prices increased to $850 per bushel before dropping back and stabilizing at $822 per bushel, he added.

Should those estimates ring true, government officials claim that it will be enough to prevent global shortages, although experts are predicting that food prices will rise, as corn is a commonly used ingredient for a plethora of different products, Suhr said. Lopez added that dairy products, poultry, and beef are also expected to be effective.

"Americans shouldn't see immediate increases in food prices due to the drought," Agriculture Secretary Tom Vilsack said, according to the AP. "What is important going forward is that we continue to do all we can to help the farmers, ranchers, small businesses and communities being impacted by this drought."

"The drought has some in the U.S. clamoring for the Environmental Protection Agency to relax its ethanol production mandates," added Lopez. "Currently about 30% of U.S. corn is diverted to ethanol production and critics say the policy drives up corn prices."