Heavy Rains Hurting Corn and Soybean Yields, Raising Prices

Rainfall has been over 3 times the normal amount in the Midwest the last few weeks, with more rain on the way. The heavy rains are affecting corn and soybean yields (video source: Clip Syndicate, Bloomberg), with just 74% of corn emerged from the ground, and only 32% of soybeans emerged. Farmers are now at a point of needing to make a decision of whether to take the Government subsidized crop insurance and keep the ground idle, or plant and take the risks of lower yields, which could be potentially as low as 75% of normal yield levels. As much as 500,000 to 3 million acres may become idle. Analysts are already cutting corn crop yields by 4 bushels per acre. As ethanol production continues to increase, expect corn prices to rise, with consumers feeling the effects at both the pump and in the grocery store.

Companies to watch that may be impacted include Archer Daniels Midland (ADM) and Bugne (BG). Others that are likely to continue to benefit from rising demand for food commodities include fertilizer companies such as Mosaic (MOS), Potash (POT), and Agrium (AGU), chemical and seed companies such as Dow Chemical (DOW) and Monsanto (MON), and agricultural machinery makers such as Deere (DE). On the direct downside are the users of corn, especially the restaurants and food producers with lower margins and less pricing power, such as Darden (DRI) and Tyson Foods (TSN).

Comments

[windinmyface2:]

It figures the government would come up with something like subsidized crop insurance to let ground sit idle, when we hear there are shortages of corn, wheat, etc, and we have to pay more for our food. This is what happened and created the dust bowel, anyone remember that. It rains like mad every SPRING here in the midwest, doesn't anyone know this, and yet we have great crops every year. Last year we had a hot dry summer, and it really hurt the crops. we need the rain now, it will be hot, and dry soon. Its something called summer.

2008 Jun 10 01:40 AM

[Greg Pinelli:]

It was "dust bowl" and resulted not from land lying idle or fallow...but from tremendous over cultivation..then drought..then havoc from midwestern wind storms.
I'd be thrilled to see the government out of the farming business altogether..let ethanol (corn based) rise or fall on its own merits..eliminate the insane sugar tariffs on Brazilian product and begin to use a product that gives much more energy out for the energy used to produce.
Corn is very hard on the land...fertilizer intensive and leaves the overwroked soil susceptible to erosion. You'd think someone from the Midwest would know that.

2008 Jun 11 12:22 AM

[windinmyface2:]

you are some what right, but I am also right. I am from a farming family that should know a little about what I'm talking about. As a farmer, I and other farmers are sick of comments from people that know nothing about it, and the government try to tell us how to do our job. Another reason for the dust bowl was the lack of wind breaks, such as no tree lines. Our worst enemy is nature its self, and government control freaks.

2008 Jun 12 10:34 AM

[lzb5ml:]

I am thankful for the rain we have had in Michigan. Our family corn fields have benefited greatly from recent rainfall. We have been hurt by droughts the last 6-7 years, which stressed plants and yields. We should have better yields on these fileds. Plants look good. As long as we do not get any flooding we should be good.

2008 Jun 20 11:07 AM

[Doug2014:]

David, I am not a farmer but I am related to them. My grandma told me a couple of stories about their farming and rain. When they would plant corn and the floods would come there was not enough time to let things dry out and re-plant corn. There was however, time to plant soybeans with a shorter growing season. Soybeans make their own nitrogen. I read somewhere that corn uses 57% of fertilizer. At the end of the season more fertilizer will have been used but not as much as Potash shareholders dreamed of in the winter. Having said that I started accumulating Deere in their DSP. Very boring, but Deere's a different company than when I played with toy tractors.

How do things measure up since your last posting?

2008 Aug 08 09:40 AM