Corn prices rise as multiple floods cut into crop
Wednesday, June 15, 2011
DES MOINES, Iowa (AP) — Brian Peterson admitted it's hard to watch as floodwaters envelope the bright green cornstalks now about knee-height, but he said he'll survive the loss at his farm along the Missouri River in western Iowa.
And experts said the nation will be OK, too, even after another in a series of events that have cut into the supply of corn, a crop that is the backbone of much of the world's food supply.
"It will hurt, but it won't destroy me," said Peterson, who has seen water submerge about 40 of his 200 acres of corn.
Water has been rising in fields along the Missouri as federal engineers let more water out of reservoirs upstream to ease conditions there. With the flooding expected to continue into August, it's not clear yet how much farmland will be affected. But the loss is expected to make only a small dent in the nation's corn crop. The U.S. Department of Agriculture estimates more than 90 million acres will be planted this year, about 1.5 million less than expected earlier this year but still more than was devoted to corn last year.
The corn supply is important because it's an ingredient in nearly every food, from cereals to sodas, vegetable oil and ice cream. Corn also feeds livestock, affecting the price of meat and dairy products.
The nation's corn farmers have been hit with a one-two-three punch this year. The flooding along the Missouri River in western Missouri and Iowa comes after 200 square miles of prime farmland in southeast Missouri was lost last month when the U.S. Army Corps of Engineers blew open a Mississippi River levee to protect a small town. When that happened, farmers in the Midwest were already behind in planting because a cold, wet spring had left many fields too wet to bring in equipment.
The losses would be less worrisome if demand for corn wasn't so strong and prices weren't already rising. Corn closed at $7.55 a bushel Tuesday, more than double what it was a year ago. The price has been pushed up by increased demand for livestock feed and ethanol and surging foreign orders.
Prices also have risen because corn stockpiles — the amount held over from one year to another — are relatively low. The U.S. Department of Agriculture likes to keep them at more than 10 percent, but they've been hovering at just over 5 percent, raising concerns that there won't be enough to meet all the demand. The U.S. is the world's largest corn producer.
Experts said they wish the Missouri River had remained within its banks because farmers could sell every kernel they grew, but they maintained the latest problem was manageable.
In part, that's because corn is so resilient, said Emerson Nafziger, an agriculture professor at the University of Illinois.
"The plants can take the stress," he said. "You can beat up on corn this time of year and it can come back nicely."
And Gerald Bange, chairman of the USDA's World Agricultural Outlook Board, said that even with some land completely lost for the year, farmers are still expected to harvest a near record 13.2 billion bushels.
While corn prices will probably continue to rise through the summer, Chad Hart, an Iowa State University farm economist, said he expects them to fall to about $5 a bushel by December.
Consumers could see higher prices at the supermarket as livestock farmers and food processors pass on their higher costs, but that won't be for a while.
"It will take six months to a year for this to show up in the grocery store," Hart said. "It will be seen more in the meats. Livestock producers are not doing so well because of these high prices."
Even if the nation's crop recovers from the year's rough start, Peterson, the western Iowa farmer, said some farmers could be seriously hurt. He said he's lived on his farm since 1978 and never experienced flooding. Now, the river has swamped some outbuildings and is creeping toward his home, but it could be worse.
"I have neighbors who will lose 1,600 acres," he said. "That will be devastating for them."