Crop outlook dimming as July heat compounded drought damage

Aug. 20 (Bloomberg) -- U.S. corn farmers hurt by the worst drought in a generation probably will harvest smaller crops than the government forecast this month, based an analysis of dry spells in the past 42 years.

In the five drought years since 1970, farmers on average harvested 85.4 percent of the acres planted, U.S. Department of Agriculture data show. That’s below the 90.6 percent that the USDA predicted for this year on Aug. 10, when the agency cut its output forecast by 17 percent following the hottest July since 1936. The annual Professional Farmers of America survey of more than 2,000 fields in seven Midwest states starts today.

Moderate to exceptional drought conditions covered 51 percent of the nine-state Midwest region as of Aug. 14, compared with less than 1 percent a year earlier, government data show. Corn and soybean crop conditions are the worst since the last drought in 1988, according to the USDA. Corn futures have surged 60 percent since mid-July, boosting the cost of making livestock feed, ethanol and food products.

“In a year like this, the only yield surprises are to the downside,” said Michael Cordonnier, the president of Soybean & Corn Advisor Inc. in Hinsdale, Illinois, who sampled crops in eight states from Nebraska to Ohio during the week ended Aug. 3. “The number of acres harvested this year will fall.”

The USDA, which in July predicted a record corn crop after farmers planted the most acres since 1937, cut its forecast to 10.779 billion bushels, down 13 percent from 12.358 billion last year. The soybean forecast was reduced 12 percent to 2.692 billion bushels, down from 3.141 billion in 2011.

Further Cuts

U.S. corn harvests were below normal during the drought years of 1974, 1976, 1980, 1983 and 1988, USDA data show. On average, farmers have collected 89.2 percent of the planted acres since 1970.

Cordonnier said the USDA will have to cut its corn estimate by an additional 5.3 percent and soybeans by 2.3 percent. Output from the U.S., the world’s largest grower and exporter of both crops in 2011, will drop for a third straight year. The USDA will next update its forecasts on Sept. 12.

“It’s a catastrophe,” said John Cory, the chief executive officer of Rochester, Indiana-based grain processor Prairie Mills Products LLC. Cory, who predicted in July that corn output would fall below 11 billion bushels, now expects a harvest as low as 9.5 billion bushels. He said the soy harvest may fall below 2.5 billion.

Yield Damage

After the worst U.S. drought since 1956, corn plants that farmers will begin harvesting next month are maturing three times faster than the five-year average, and the rate of pod development by soybeans is 19 percent above normal, USDA data show. Rapid development cuts yield potential and reduces the benefits of rains the past two weeks, Cory said.

The 20th annual Pro Farmer tour will include about 120 grain buyers, analysts, traders and farmers as crop scouts to survey fields in Ohio, Indiana, Illinois, Iowa, Nebraska, South Dakota and Minnesota. Corn-yield estimates and soybean-pod counts will be reported daily and then incorporated into a national crop forecast by Pro Farmer on Aug. 24.

“The heat was the big problem this year for corn pollination,” when kernels were forming on cobs in July, said Kevin Rempp, 54, who farms about 1,200 acres of corn and soybeans with his father near Monetzuma, Iowa. Rempp predicted corn yields in Iowa, the biggest U.S. producer, will drop 30 percent from last year and soybeans will be 10 percent to 20 percent lower. “I have farmed for more than 35 years, and this crop is the hardest to predict because yields are extremely variable across each field.”

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