Governors' Biofuels Coalition

The nation’s No. 1 crop may be withering in parched fields across the country, but there’s no reason to panic, U.S. Agriculture Secretary Tom Vilsack said Friday in Omaha.

The corn crop — which feeds cattle, pigs and poultry, produces ethanol fuel, plastics and sweeteners, and is exported around the world — has been clobbered by heat and a lack of rain this summer.

The crop could be 13 percent smaller than the amount harvested in 2011, which would be the smallest crop since 2006, the U.S. Department of Agriculture said Friday in its monthly crop production report.

The soybean crop would be 12 percent less than last year.

“We’re going to get through this,” Vilsack said. “The key here is … that we don’t panic, that the rest of the world doesn’t panic and that we don’t jump to conclusions about what we need to do or not do because we’re going to have a little less corn and a little less soybeans than we thought a month or two ago.”

Vilsack said it was no surprise that the historic drought has affected production. Still, the corn crop this year is forecast to be the eighth-largest in history.

Vilsack said it will take time for retail food prices to reflect any impact from the drought and a smaller-than-expected corn crop. Beef, poultry and pork prices may stabilize or decline as more meat goes to market in the short term. Livestock producers are expected to cut back their herds and flocks in the face of more expensive corn-based feed, he said.

“Longer term, we obviously may see some increases, but put it into perspective,” he said. “Farmers only get 14 cents of every food dollar. Somebody else gets 86 cents.”

After an initial surge Friday morning, corn prices at the Chicago Board of Trade closed near $8 a bushel, in part because the USDA report was less pessimistic than traders expecte

Vilsack said increases in the price of corn and other commodities don’t necessarily translate into dollar-for-dollar increases in food prices.

USDA economists expect food inflation to be between 3 percent and 4 percent next year, just a bit more than the historic 3 percent. The drought might be responsible for a half percentage point to 1 point of the increase, Vilsack said.

Vilsack was in Omaha to address about 250 members of the American Coalition for Ethanol. He also met with Nebraska wind energy and rural development officials in two other private sessions.

The crop report verified what most Nebraskans and Iowans see when driving down country roads.

“This may be the worst year I’ve had,” said Carl Sousek, who raises dryland corn near Prague, Neb. “I’ve been farming since ’81 and we’ve had some tough years, but I don’t know that it’s ever been this bad.”

Some farmers said the prediction was better than what they’re seeing in their field

Bob Bartek, who farms near Ithaca, Neb., harvested non-irrigated corn last week. It yielded a scant 30 to 80 bushels per acre.

But it’s not a disaster everywhere.

Darrel McAlexander, who raises dryland corn near Sidney, Iowa, said he had worried the report would be even worse. He declared the projection about right.

“We’re going to have more corn than what I thought,” he said, anticipating a harvest of between 100 bushels and 130 bushels per acre, though others in his region will suffer bigger losses.

Irrigation may be a saving grace for many farmers in heavily irrigated Nebraska. Though corn prices are at record highs, irrigation farmers also have higher expenses.

“Our irrigated corn looks good — it’s not going to be a bin-buster, but it’s going to run 180 to 220 bushels per acre,” said Scott Houck, who raises corn and soybeans near Strang, Neb. About 80 percent of his crop is irrigated.

The corn forecast worsened — compared with projections issued a month ago — and is expected to increase pressure to relent on a federal mandate for the United States to use more ethanol fuel, which is derived mostly from corn.

In a pep talk to the ethanol coalition, Vilsack said the industry must push back against opponents who are organizing a well-financed campaign against the fuel rule.

Vilsack said livestock, export and ethanol markets quickly reacted to the reality of the drought and that ethanol’s benefits to the rural and national economies are too important to risk losing if the fuel mandate is waived.

Ethanol producers say they have adapted to the drought by reducing corn consumption and slowing production.

Steve Nelson, an Axtell farmer who is president of the Nebraska Farm Bureau Federation, said consumers should not worry too much about the drought’s impact on food prices or the overall economy.

“One of the things we have in Nebraska is a lot of irrigation,” he said. “The yields won’t be off as far or down as much on irrigated land as it is on non-irrigated land. From an overall economy perspective, Nebraska is fortunate to have the irrigation we have.”

Vilsack said the relatively large projected harvest this fall is an impressive feat during a historic drought.

“That speaks volumes to the resilience of American producers and their willingness to adopt new technologies that make it a little easier to get through a tough period.”

 

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