How bad is the corn crop? That’s the million-dollar question. USDA has lowered its harvest predictions to just slightly above 10 billion bu., but analysts contend the number is either largely overstated or understated. This is unique because the drought is not something new, and harvest is already well underway in parts of the Corn Belt.
The crop is made, so why is there still such debate about the crop size? While everyone agrees it will be dramatically smaller, just how much smaller is still in debate. Part of that is due to conflicting information. The eastern Corn Belt, for instance, appears to have been brutalized by the weather, while the fringe areas of the Corn Belt are better than expected. In addition, we have record acreage and we’re likely to see record acreage harvested in one form or another.
Yet, we’re also expecting yields to be off of the trend line to a degree we haven’t seen for a long time. Then you throw in the new marketplace created with the subsidization of the ethanol industry and there seems to be some real uncertainty about where prices will land this fall. Has the market priced in the current harvest at today’s record prices or is there significant more upside potential?
My View From The Country Blog: Corn Crop Woes Take A Toll On Cattle
Because of the widespread nature of this drought, the implications for the industry go far beyond the effect that corn prices will have on calf prices this fall. But while the difference between $8/bu. and $10/bu. corn is monumental in the short term, the greatest impact for the cattle industry is likely to be in the long term.
$10/bu. corn will cause massive liquidation in the short term and affect the size of the industry in the long term – even when weather conditions improve. The added volatility and uncertainty make all of the marketing and management decisions created by this drought all the more difficult, while increasing their significance at the same time. The stakes have never been higher.
