Corn and Soybeans Take a Hit

On August 11, the USDA released its monthly crop report forecasting a dismal autumn harvest of corn and soybeans, locking in higher prices and falling short of meeting the global supply for food, livestock feed and ethanol. The report is in line with expected predictions of a smaller yield due to overwhelming heat and drought. Additionally, late planting and flooding in certain areas of the country deterred spring wheat plantings.

The USDA predicts farmers will produce 12.914 billion bushels of corn this year (a 4.1% decrease from July’s estimate). Lack of rainfall in July and August dramatically impacted the corn market, mainly in the southern and eastern areas of the country and along the Corn Belt, while the western region took a lesser hit. Hovering just below record levels, the disappointing harvest comes when demand remains at one of its highest levels.

Soybean predictions dropped to 3.056 billion bushels, down 5.2% from the July estimates. Impacting supply further, market predictions conclude farmers sold about 80 percent of soybeans from the latest harvests, and may be holding onto crop surplus. After covering expenses, farmers remain hesitant to hastily sell the remainder of the soybean supply.

“The 2010-2011 marketing year is also ending under a cloud of poor economic and financial news that raises concern about demand for corn and soybeans in the feed, energy and export markets during the year ahead,” University of Illinois Agricultural Economist Darrel Good states.

The USDA will respond to the September 1 commencement of the corn and soybean marketing year with updated consumption forecasts.

“The strength of demand determines the quantity of corn and soybeans that will be consumed and the price end users are willing to pay,” Good said. “In the near term, however, the size of the 2011 U.S. corn and soybean crops will be most important for prices.”