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Growing Doubts About Grain Harvest



It’s Official…Grain Supply in Doubt
© Geri Guidetti, 1996

This report will be in addition to my normal, weekly grain supply 
update.  Data from farms reflecting last week’s weather and planting 
progress across the land are not yet available.  I expect they will be 
within the next two days.   Information in this report reflects 
important new analyses of the Nation’s  grain supplies and markets up to 
July 2, 1996. 

"We’re not going to run out of  (corn) supply" this summer, "but Lord 
help us if we have a crop failure,"
Daniel Basse, executive VP of AgResource Inc., a Chicago agricultural 
research firm, told the Wall Street Journal.  His assessment reflects 
the new pessimism among grain analysts who had expected that this year’s 
corn reserves would reach an all-time low because of several years of 
bad corn harvests.  You’ll remember that we were to be down to a 
two-week supply  when we are ready to harvest this year’s crop. But, on 
Friday, the Agriculture Department reported that corn reserves on June 
1st totaled only 1.72 billion bushels, a mere half of what we had last 
year and much lower than even the most pessimistic analysts had 
predicted.  Then Monday’s weather forecasts for the next two weeks were 
released;  more above-normal temperatures and below-normal precipitation 
in growing areas already in trouble.  Above normal rainfall and cold 
temperatures had already plagued the Midwest, delaying spring planting. 

 Many farmers had switched to lower yielding, shorter-season corn 
varieties or chose to plant substitute crops, instead.  Though the 
higher prices for corn encouraged them to plant more acreage than they 
had in years, the weather has not been cooperating.  Estimates of the 
potential size of this year’s harvest have been slipping daily.  Mr. 
Urbanchuk of AUS Consultants predicts a corn harvest of 8.8 billion 
bushels, while David Nelson at NatWest Securities says only 8.3 billion 
bushels are likely.  Neither of these potential harvests would provide 
enough corn to rebuild the U.S. corn reserves even to comfortable 
levels.  That means high prices through NEXT year while we wait for ‘97s 
crop. The Agriculture Department said "corn demand is so strong that, if 
unabated, spot shortages might develop in the weeks before the autumn 
harvest replenishes supplies," according to the Journal.  Corn futures 
prices hit an all-time record yesterday on the Chicago  Board of Trade. 
 In fact, on Friday, July corn rose 34.75 cents a bushel, the highest, 
single-day rise since 1973.  Mr. Basse told the Journal that "simple 
economics" will stabilize the market.  As prices get high enough for 
demand to drop off, fears that corn stockpiles will run out will 
subside. (Don’t count on it, IMO.)

The Agriculture Dept., in the meantime, reported that it will release 16 
million of its 45-million bushel grain reserve within the next 10 days 
to ease the crisis for U.S. cattle ranchers. The ranchers were already 
switching to wheat as corn prices climbed higher than wheat.  Most of 
the released stockpile reserves  will be going to the drought-stricken 
Southwest.  On Monday, President Clinton declared the Southwest to be in 
a state of emergency.

Now for the trickle down.  We can live without corn-on-the-cob, corn 
bread and, if we have to, even  the beef, chicken and pork fed by corn, 
right?  Well how about all of those corn syrup-sweetened products most 
folks eat…like sodas, catsup, cereals, jams, jellies, juices, salad 
dressings, etc. ad nauseum.  Or how about all of those products made 
with corn oil?  Or the ethanol fuel supplies? Or citric acid in nearly 
all canned fruits, vegetables, sodas, etc.?  Well, 
Archer-Daniels-Midland, a large producer of corn-based ethanol fuel, is 
already operating its four plants at 20 percent of capacity and reports 
that its corn syrup business is only "marginally profitable." 

A couple of weeks ago, I suggested that the writing was on the wall for 
food inflation.  Economists now look at grocery inflation to rise from 
its 2.8 percent level in ’95 to up to 5.5 percent.  If we have a 
widespread corn crop failure this autumn, count on a shortage and much 
higher food inflation than even these estimates.  Of course, no one has 
yet written about the impact of continuing and growing global demand for 
U.S. grain on our supplies and costs.  I mentioned Egypt  last week.  
Keep your eyes on the Ukraine, normally a grain exporter.  They are in 
weather trouble, too.  More as this week’s data arrives.  If you use 
citric acid in your canning, you might want to get it at its current 
price.  Open-pollinated corn seed for planting next year?  Now’s the 
time to try to find it—quickly.  For those with my book, the seed houses 
 begin on p. 39.  Good time, in general, to stock up on things you don’t 
think you can live without that contain corn products.  BTW, you can 
freeze corn oil margarine.  Bet on canola  and soy oils going up in 
price as demand for these increase when corn oil is too expensive or 
nonexistent.  It will be stockpiled by industries that depend on it…chip 
manufacturers, etc.  Your friendly prophet of gloom,
:-( Geri Guidetti, The Ark Institute
************************************************************************Build Your Ark!  How to Prepare for Self-Reliance in Uncertain Times…
Book I: Food Self-Sufficiency    http://www.lis.ab.ca/walton/geri.html
Grain Supply Updates:   http://www.lis.ab.ca/walton/geri1.html
This article may be reprinted IF my copyright and Sig. File  are 
reprinted intact.