Friday, March 4, 2011

Are We Prepared for a Weather Induced Smaller Corn Crop?

Is today's corn demand driven by current ethanol policy goals realistic? Is it ethical? Are we prepared for a low corn crop production year?

It would seem that as global food prices are being driven up causing hardship especially in the food-poorer nations and those experiencing sharp rises in food inflation, that we are using corn in the U.S. at a faster rate than we are producing it. And we are by far the largest corn exporting nation which the world depends upon. Livestock numbers have already been culled to the point where cattle are at a 53 year low and pork producers are worried about becoming insolvent.

The ethanol industry is profiting from today's higher gasoline prices, even with the current high corn input costs. The U.S. corn stocks to use ratio is at a dangerously low 5 percent which has caused corn prices to double in seven months. This condition has a ripple effect across all food commodity groups and across the world.
Kay McDonald

The University of Illinois is heeding a "What if" warning to policy makers concerning a false security as related to recent weather trends:

"A lack of widespread concern about low corn yields is motivated by the yield experience since 1995. Many attribute the lack of a major shortfall in the U.S. average yield since 1995 to the adoption of improved seed genetics and seed traits that have increased yield potential and reduced vulnerability to adverse weather conditions.

In contrast, the crop weather models that we have developed attribute much of the unusually good yield performance since 1996 to an extended period of generally better than average weather. The bottom-line is that we believe the risk of weather-induced shortfalls in corn production may be greater than generally perceived, suggesting that market participants and policymakers may be ill-prepared to cope with such a shortfall should it occur."

Source: Farmdoc --- Darrel Good and Scott Irwin

No comments:

Post a Comment