Drought dims U.S. farm economy hopes

Two Dozen

ADM, based in Decatur, Illinois, uses the grain to make more than two dozen products including ethanol, sweeteners and animal feed, and the company has businesses that store and transport the commodity for customers including farmers.

“Like others in the agriculture industry, we are monitoring the drought and the weather forecasts very closely,” Jackie Anderson, an ADM spokeswoman, said in an e-mail. Spokesman David Weintraub declined further comment on the impact.

Rising prices can benefit farmers who have successful harvests or took out sufficient insurance on their fields. Farm cash receipts are now expected to be a record $140.5 billion for the crop year of 2012-13, up 4 percent from 2011-2012, according to a report from JPMorgan Chase & Co. on July 11.

Still, with such a wide swath of farmland facing damage, that may not matter much.

‘$7 Corn’

“Farmers have always said to me $7 corn is no good if I have no corn,” said Ann Duignan, the JPMorgan analyst who wrote that report, in a Bloomberg Television interview July 10.

Stocks for agriculture-equipment sellers initially rose as the drought drove up prices for soybeans, corn and wheat. Agricultural-machinery stocks as a whole are up 6 percent over the past month, according to data compiled by Bloomberg. Since July 5, Deere & Co.’s stock has fallen 5.5 percent.

As the impact of the drought on yields is unclear, “it would be premature to make predictions,” Ken Golden, a Deere spokesman, said in an e-mail. “Overall farm cash receipts are the best indicator of future sales of John Deere farm equipment. We have said in the past that our expectation for this year is that farm receipts will remain strong,” he said.

Although farmers’ cash receipts “will be higher, they are not going to spend on equipment because they don’t need it,” Karen Ubelhart, an analyst for Bloomberg Industries, said in an interview. “You are going to see people lower expectations for the full year.”

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