USDA surprised the grain markets by lowering the projected 2012 national average corn and soybean yields by more than expected in estimates released on July 11. USDA is now estimating the 2012 U.S. national average corn yield at 146 bu./acre, based on U.S. crop conditions on July 1. This is down 12% from the June 1 national corn yield estimate of 166 bu.
USDA has dropped 2012 national soybean yield estimate to 40.5 bu./acre on July 1, which is down 8% from a national yield estimate of 43.9 bu. on June 1. Final national average yields in 2011 were 147.2 bu. for corn and 41.5 bu. for soybeans. Since July 1, crop conditions have worsened in many of the major corn and soybean-producing areas of the U.S., leading to the likelihood of even further reductions in USDA projected national average corn and soybean yield estimates in future months.
Based on the June 1 national corn yield estimates, USDA was estimating the 2012 U.S. corn crop at 14.79 billion bushels, and projecting corn carryover levels to increase to 1.88 billion bushels by the end of the 2012-2013 marketing year. As of July 1, estimates for the total U.S. corn production are now below 13 billion bushels, which will likely lower projected carry-over levels back below 1 billion bushels, similar to 2011-2012 carry-over levels. Soybean carry-over levels at the end of 2012-2013 were already projected to be very tight at 145 million bushels, and will likely be even tighter after the reduction in the 2012 estimated national soybean yield.
Recently, there have been many comparisons regarding the drought of 2012 to the earlier U.S. droughts of 1988 and 1983. The drought in 2012 is rapidly moving toward the crop loss levels in those previous years. In 1983, there was a 20% reduction in the national corn yield, which would equate to a national corn yield of about 133 bu./acre in 2012. By comparison in 1988, considered the worst drought year in modern times, there was a national corn yield reduction of 30%, which would correlate to a 2012 national corn yield of about 116 bu./acre. Some experts feel that we are already approaching the 20% loss level nationally, and could reach the 30% loss level or greater, if we do not see improvement in weather conditions very soon.
USDA Announces Disaster Assistance
On July 11, U.S. Secretary of Agriculture Tom Vilsack announced some measures to assist producers suffering from the impacts of drought and other natural disasters. Over 1,000 counties in 26 states were designated as primary disaster counties. There were no designated counties in Minnesota or Iowa, but that could likely change as the drought continues to worsen. Counties in the designated areas and adjoining counties are eligible for low interest FSA disaster loans, at an interest rate of 2.25%, which was reduced from a previous level of 3.75%. It also opens up CRP land in the designated counties for haying and grazing, with a 10% reduction in annual CRP rental rates, which was lowered from a previous reduction of 25% in CRP rental rates.
Some U.S. Senators have also called for funding of the Supplemental Revenue Assistance (SURE) Program for the 2012 crop year. The SURE program, also called the “permanent disaster program,” was implemented as part of the 2008 Farm Bill to cover crop and livestock losses, not covered by crop insurance and other federal programs. Funding for the SURE program ended with the 2011 crop year, and there are no provisions in the Farm Bill proposals passed by the U.S. Senate or the U.S. House Ag Committee to restore SURE funding for 2012. The SURE program could offer up to a maximum of $100,000 for each eligible producer in designated disaster counties.
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at email@example.com.