The Department of Agriculture’s latest grains forecast confirms what analysts expected: the drought has decimated the nation’s corn crop. The latest USDA report says the nation’s corn crop could be down 13 percent from last year and the lowest since 2006. Soybean production could be down 12 percent from 2011 and the lowest since 2003.
Director of the Food and Agricultural Policy Research Institute at the University of Missouri, Pat Westhoff, says that will translate to higher meat prices. “We won’t see too much in the near term. We could even have the opposite effect where … especially in the case of beef we’re going to have a little bit more beef hitting the market here in the near term as farmers liquidate animals they might otherwise have held onto. That’s going to actually push beef prices down a bit in the very near term, but by 2013 I’d expect to see higher prices for meat across-the-board.”
How long it will take for the economy to recover fromthe drought depends on the next few years’ production.
“If we were to have a really big crop in 2013, we could rebuild stocks pretty quickly. With the kind of acreage we planted this year to corn, for example, we just had what should have been a longer-term trend yield. We could have had a very big crop this year and could have seen much lower prices. If we were to have that kind of production level in 2013, it might bring prices back down again pretty hard from where they are right now.”
Westhoff says the nation’s corn, soybeans and wheat in storage were already low coming into the growing year. “We’ll see in September what the final estimates are in terms of how much corn we’re carrying over into the new marketing year, so this is a very different situation from 1988. In many ways this drought is comparable in scale and severity to the ’88 drought, but the big difference is in ’88 we had a whole lot of corn in storage, a lot of soybeans, a lot of wheat in storage. This year we don’t, so we have to get by on what we’re producing this year in order to get from here until the next harvest.”
The report is a reminder that the drought extends well beyond Missouri. Westhoff says it will affect feed prices all around the world.