Corn wilts and food costs gain as good dirt goes bad

Forecasters predict worsening conditions

‘Desert’ Ranch

Feed costs will be 50 percent higher for Steve Foglesong, 55, who raises 9,000 head of cattle and farms 1,800 acres of corn and soybeans about 65 miles southwest of Peoria, Illinois. Soybean-meal futures advanced 48 percent to record this year in Chicago trading. Foglesong said he may chop down his corn fields and feed the crop to his herd.

“These pastures are bone dry,” Foglesong said by telephone. “They are like a desert.”

In Texas, the biggest U.S. cattle producer, the grain rally is adding to the financial damage from a 2011 drought that was the worst in at least a century and forced ranchers to cull herds. The state’s losses reached $7.62 billion last year, including $3.23 billion for livestock producers, according to Texas A&M University’s AgriLife Extension in College Station.

Most feedlots are losing $150 to $200 per animal sold for slaughter, said Lonnie Busch, a 44-year-old who runs a feed yard owned by Cargill Inc. in Leoti, Kansas. Feedlots buy year-old animals that weigh 500 pounds (227 kilograms) to 800 pounds, fattening them on corn for four or five months until they weigh about 1,200 pounds.

‘Irreversible Damage’

Drought conditions in the southwestern half of the Corn Belt, which runs through the Midwest and stretches from the eastern Dakotas through Ohio and Michigan, are going to get worse, after causing “irreversible damage” to some crops, according to AccuWeather. At least 50 percent of the region will have below-normal rainfall and above normal temperatures in the next 30 days, said Dale Mohler, an AccuWeather meteorologist.

“You need an inch of rain a week to get a good crop, and you’re going to be getting half an inch or less most weeks through mid-August” in the southwestern part of the Corn Belt, Mohler said by telephone from State College, Pennsylvania.

On the 2,900 acres he farms in Indiana, Flora said he will probably make claims on his crop insurance that will pay about 85 percent of a historical yield on the land.

Before the drought, Flora bought a 560-horsepower Deere & Co. 9630 tractor that cost him $360,000. “I would cancel out, but they have my old tractor resold in Illinois,” he said. “If not for that, I would think about backing out because cash flow is going to be hurting pretty bad this year.”

Tractor Sales

Randy Allen, the store manager at the Wright Implement, a distributor of Deere farm equipment in Crawfordsville, Indiana, said he’s already seeing a decrease in sales. A new planter can cost $300,000, while a combine fetches as much as $500,000 and a tractor is priced at about $200,000, Allen said.

Less than 5 percent of normal rains fell in the past month on ground farmed by 60-year-old David Adcock near Atwood, Illinois. The lack of moisture probably will cut the farm’s yields in half to about 100 bushels an acre, said his son John.

“There was a point in time we had a potential for a world record corn crop if we had the rains,” David Adcock said in an interview at his farm. “We’re scraping on the bottom of the bin already. It’s going to be a big, big deal.”

Bloomberg News

--With assistance from Alan Bjerga in Washington and Jeff Wilson in Chicago. Editors: Steve Stroth, Millie Munshi

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