A Publication of WTVP

Flooding this spring and summer has surrounded the Peoria region. To the west, Iowa, the top corn-producing state in the nation, has been inundated with rain, causing major flooding of its rivers and farmland. Wisconsin has also experienced heavy rains. To our east, Indiana has been hit hard, especially around the Indianapolis area, where measurements of rainfall could be more easily associated with a January snowfall. In our state, southeastern Illinois has been hit the hardest, with nine- and ten-inch rains causing the normally docile Embarras River basin to flow like the mighty Mississippi.

Farmers and volunteers worked endless hours to keep the Mississippi within its levees. Still, the levees broke in several places, and thousands of acres of crop land were flooded. Not only did the waters flood fields downstream, but it backtracked and flooded fields upstream as well.

On June 30th, the U.S. Department of Agriculture released its crop acreage planting report. Estimates put corn acres at 87.3 million for 2008, down from the 93.6 million acres planted in 2007, but the second-highest acreage since 1946. How many millions of corn acres have the heavy rains erased in 2008? Estimates have put the number at four to five million. The fields in flood plains are easier to calculate—it’s the fields far removed from rivers and flood plains that make acreage loss purely a guesstimate. Many fields just a short distance from Peoria have ponded areas where the crop was lost. If the corn plant survived the flooding, in many cases yield loss will occur because plant health was sacrificed and nitrogen fertilizer was lost due to the standing water.

It looks like last year’s record-breaking 13-billion-bushel corn crop will hold, as many Midwestern farmers will be harvesting a less-than-desirable yield this fall.

The flooding rains paved new plateaus in the commodities market as corn passed $7 a bushel and soybeans topped $15. Unfortunately, this is really putting the squeeze on livestock farmers, who are feeding this expensive grain to hogs, cattle and poultry.

Some have said this has been the perfect storm for high commodity prices. During the last two decades, farmers have worked hard to improve demand for their corn and soybeans. Demand for ethanol has finally risen, although ethanol plants are currently feeling the financial squeeze due to high corn prices. Even with these high prices, there is at least one bright spot. Ethanol plants produce a valuable co-product in the ethanol-making process called Dried Distillers Grain (DDGs), or gluten feed. Each 56-pound bushel of corn will produce about 15 pounds of this livestock feed, adding much-needed revenue for the ethanol industry.

Several years ago, corn and soybean organizations set up offices in developing countries to improve exports. Last year, the U.S. exported approximately 2.6 billion bushels of corn, or about 20 percent of production. In the past, exports have been in the 1.5 to 2 billion bushel range. China’s consumers have increased their standard of living and have had a taste of a protein-rich diet of meat. There is a lot of corn and soybeans fed to livestock.

The perfect storm was…demand, demand, demand…for grain commodities through increased production of ethanol, increased exports and the world’s population shifting to a higher-protein meat diet. Now, the perfect storm has turned its sights on…supply, supply, supply…which has ironically been caused by many “flooding storms” over Midwestern skies.

Even though corn prices have reached record levels due to high demand and nervous supplies, here is some final food for thought. Petroleum prices recently topped $145 a barrel. In 1947, corn was priced at $2.16 a bushel. Guess what $2.16 could also buy in 1947? (Hint: it’s priced by the barrel.) iBi