Thursday, August 16, 2012

Corn In A Whole Lotta Hurt

With half of the country in some level of moderate or worse drought, summer heat has been relentless for chunks of the United States.  Besides summer heat, this summer's drought is having an impact on your wallet and on your table in one major way.

Corn condition in the a big way.

Click on image for full size graphic.  Courtesy USDA.
The weekly crop report came out on Monday from the United States Department of Agriculture and this year's corn crop in much of the corn belt is hurting badly.  The average condition of corn in the 18 biggest corn producing states is faring much worse this year than last year.   51 percent of corn crops in the "big 18" are in either very poor or poor condition this year, contrasted to just 15 percent last year at this time when dry summer weather was largely confined to Texas and Oklahoma.

Crops here have not fared as badly -- in Pennsylvania just 11 percent of corn crops are in poor or worse shape, with 53 percent in good to excellent condition.

In terms of impact, corn prices have risen relatively dramatically the past several weeks, jumping over 50 percent in six weeks time from just over $5 a bushel to nearly $8 a bushel.  Given that corn is a major staple in the American diet -- not just what we consume but what our cars consume, the increased prices from reduced supply are going to have an impact on our wallets in the coming weeks.  Gas prices have nudged higher partly in response to lower production in refineries due to less corn available for ethanol production.

While we will likely not see a 50 percent jump in prices of basic corn-based food products (tortillas, chips, cans of corn, etc.), an uptick in the prices for those items is not out of the question over the next several weeks given that we may see the lowest levels of corn production in several years in the US.