Columbia Daily Tribune, MO
06-14-07
Across the country, farmers fear coming up dry
McClatchy Newspapers
CHICAGO - Sunny weather across the Midwest has commodity traders uttering
the "D" word in Chicago’s agricultural markets.
Almost two decades after the last widespread drought, the prospect of dry
weather stretching into the critical growing period of late June and early July has
put farm country on edge.
The rapid growth of corn-to-ethanol factories leaves less margin than ever for a
crop disaster. And although growing conditions have deteriorated only marginally
so far, ominous forecasts have rekindled memories of 1988.
Long, severe dry spells strike the Corn Belt every 19 years on average, says
Elwynn Taylor, professor of agricultural meteorology at Iowa State
University. "So it’s not too early, obviously, to be thinking about it," Taylor says.
"The time is up. Nature tells us we’re due."
Corn futures rose to the highest level in more than two months at the Chicago
Board of Trade on Monday, extending a rally that has sent prices to three-year
highs on speculation that dry weather will sharply reduce crop yields even as
demand soars.
Corn for July delivery rose 14 cents, or 3.6 percent, to $3.96 a bushel, the
highest closing price for the most-active contract since March 29. The price of
America’s biggest cash crop has surged 64 percent in the past year, hitting a 10year high of $4.50 on Feb. 26.
Soybean futures for July delivery rose 8.5 cents, or 1 percent, to $8.30 a bushel
in Chicago, up 42 percent from a year ago as farmers shifted acreage to more
lucrative corn.
"The jury is out a lot on whether this is a drought scare or the preliminary stages
of the real thing," says Taylor. "In the markets, there’s more placing of bets than
managing of risk."
In Emden, Ill., 35 miles southwest of Bloomington, farmer Kent Kleinschmidt rode
his tractor Tuesday morning across fields that looked remarkably healthy. Much
of his corn is knee-high and dark green, thanks to a lucky band of showers that
swept across northern Illinois last week.
"We were fortunate to be under one, and we caught a half-inch to an inch," says
Kleinschmidt, who farms about 1,000 acres. "When you play the weather game,
there’s the haves and the have-nots."
Meanwhile, about 100 miles to the southeast in Tuscola, Ill., farmer Bryan
Fogerson drove his tractor Monday over cracked, powdery topsoil. The lightgreen leaves of his corn crop were rolling up in the heat of the day, a defense the
plants more commonly employ at the peak of the summer later in the year.
"Things are definitely too dry, and it’s definitely starting to show," observes
Fogerson, who farms 2,000 acres.
No question, a soaking rain could make up for the damage. Three to five feet
below the surface, soil moisture levels have yet to deteriorate. And with the most
acres planted in corn since 1944, the potential remains for an enormous harvest
if the weather would cooperate.
Meteorologist Drew Lerner can’t say whether the Midwest is facing "a big, bad
drought," but he feels confident that farmers "will be fighting dryness for the next
several weeks for sure."
All the signs point to that dry bias, he says, from sunspot activity and airflow
patterns to sea-surface temperatures in the Atlantic and Pacific oceans.
Still, conditions have not passed the "point of no return," says Lerner, president
of World Weather Inc. in Kansas. "If we get timely rains and seasonal
temperatures for the rest of the summer, the crop will be just fine. Any rain in the
next week or week after would be a million-dollar rain. It could turn around the
crop substantially."
A big crop is needed to meet the new demands of the booming ethanol industry,
which has expanded in recent years to encompass 119 bio-refineries.
Some 77 more are under construction, and another eight are undergoing
expansion, according to the Renewable Fuel Association trade group. And
although research proceeds on alternative raw materials such as switchgrass,
the vast majority of those operations will depend on corn.
Once new plants come on line, practically nothing will stop them, says Wallace
Tyner, agricultural economist at Purdue University. The combined impact of a
generous federal subsidy and high oil prices means that even if a bushel of corn
soared to $5.50, the typical plant still could break even from a cash-flow
standpoint, he says. "We’ve got a long way to go before they can’t cover their
costs."
The same is not true of livestock producers in the United States and abroad, who
would be compelled to cull their herds if feed became so expensive, Tyner notes.
Those cutbacks ultimately would lead to higher prices for meat in the grocery
store. "The market will do the rationing," he says.
Considering those high stakes, the current focus on the weather makes sense to
Meteorologist John Dee of Global Weather Monitoring in Mohawk, Mich.
Even in the aftermath of the 1988 drought, commodity traders following the
weather were interested only in forecasts for the Midwest and South America
during peak growing periods. These days, weather is a factor in the markets
"practically year-round," and critical coverage areas stretch from China to
Belarus. "We’re in a global market, for sure," Dee says.
Lately, concern has focused on the Deep South, once inconsequential for corn
production but now important because so many farmers have switched to grain
from cotton and other crops. Alabama and Mississippi have been "extremely
dry," even worse than the stretch of central Illinois where farmers have seen
precious little moisture since May 1.
"We’ve caught a few little rains," Fogerson reports. "The old saying is ‘Rain
makes grain,’ and that’s true. I’ll keep my fingers crossed."