U.S. says corn crop will be bigger than expected
The Department of Agriculture says the harvest will be 4.9% bigger than it projected a month ago, as fears of flood damage have abated. Consumers may see lower prices, but some experts are skeptical.
The U.S. corn crop looks to have escaped heavy damage from massive flooding in the Midwest in June, the Department of Agriculture said today in issuing a rosier-than-expected projection for this year's harvest.
Today's estimate said that farmers would harvest 4.9% more corn than was projected in July and that market prices would be lower than projected.
Futures contract prices for corn fell on the commodities markets in response to the report. Some analysts said that would help ease food price inflation and reduce the financial pressure on ethanol refiners, which are becoming an important segment of the U.S. fuel market.
The USDA now expects that cash prices for corn during the marketing year that starts Sept. 1 will average $5.40 a bushel, down from $6 projected in July and the record $7.99 futures contract price reached earlier this year.
But some analysts believe that the USDA is overestimating the health of the current crop and that it will have to cut its projections in coming months.
"Price could start to rise again in October or November as people begin to realize that the harvest is coming up short," said Gail Martell, a Milwaukee-based agriculture analyst for Storm Exchange, a weather-hedging firm.
Corn has taken an increasing role in the national economy in recent years because of its dual role as a source for auto fuel and its ubiquitous use in the food industry. The grain is the major feed source for livestock and is an ingredient in foods as disparate as yogurt, soda, cereals and ketchup. Corn is also a major export item.
The USDA estimated that the crop would total 12.3 billion bushels, up from 11.7 billion projected a month earlier; that would make the harvest the second largest on record. The upward revision from a month ago comes after heavy flooding in the Midwest delayed planting at some farms and threatened crops already in the ground. An analysis of satellite imagery by Lanworth, a natural resource information company in Itasca, Ill., supported the USDA revision, said Nick Kouchoukos, Lanworth's director of information services.
Still, farmers are expected to harvest about 79 million acres, about 8% less than last year.
The arguments over the size of this year's harvest come at a time of rising demand from ethanol producers and export partners looking to gobble up the grain for foreign feed supplies.
