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Grain Supply Update: Sept.13, 1996



Grain Supply Update: Sept. 13, 1996

	U.S. Food Supply Now Hinges on Weather Wild Card
			(c) Geri Guidetti, 1996

A study of  this past week’s agricultural commodities markets is a 
poignant reminder of our essential dependence upon the whims of Nature 
for our survival.  Despite the best efforts of our sophisticated food 
production systems and  technologies, the adequacy of  this year’s 
supplies literally hinge on weather occurring over the next few weeks.  
In fact, the next two weeks may prove critical to our nation’s food 
stockpiles until 1997’s harvest.

The WSJ’s Commodities section headlines/quotes over the past five days 
reflect food traders’ recognition of our current vulnerability: 

	Monday:	For Crops, the Wild Card Remains the Weather
	Tuesday:Corn and Soybean Futures Prices Slip As Possibility of  
         	an Early Frost Recedes
	Wednesday: Soybean futures rose after forecasts showing cooler
		temperatures for the Midwest this week revived concerns 
		about damage to the late-developing crop.
	Thursday:  Grain Futures Prices Fall After Harvest Estimate
	Friday:	   Corn, Soybean Prices Rebound on Frost Fears

Making the debate over food supply prospects even more interesting, on 
Wednesday the U.S.D.A.  raised its size estimates for this year’s corn 
harvest 1% over its August estimate.  It now projects 8.8 billion 
bushels will be harvested;  in August, it projected 8.695 bushels, 
making this month’s report  a bit more optimistic.  Their estimate of 
corn in storage at the end of August was 409 million bushels, yet this 
is only one-fourth  the stockpile many analysts consider adequate for 
the nation’s needs.  Keith Collins, chief economist for the Agriculture 
Department said, “The immediate scare about running out of corn is 
passing.”

Is it?  Perhaps the key word here is “immediate”.  Keep in mind that the 
government’s latest estimate is based on field and crop conditions 
through September 1 despite its release this week.  In this past week, 
Sept. 7 - 13, Hurricane Fran’s impact on the Mid-Atlantic states was 
still being assessed. The government’s National Agricultural Summary for 
Sept. 2 - 8 reports, “Heavy rains and high winds from Hurricane Fran 
damaged crops and caused lodging (beating down of crops) and flooding in 
many fields in the Mid-Atlantic.” Both North and South Carolina, 
heaviest hit by the hurricane, are key producers of both corn and 
soybeans.   Acreage planted to these crops is highly concentrated along 
the eastern borders of these states, the same regions hardest hit by 
Fran.  

Now private weather forecasters are predicting the possibility of a 
freeze on Sept. 23 and 24 in the Midwest cornbelt.  In fact, a frost 
warning was issued last night, Sept. 12, for the northern half of 
Minnesota. This, as you will recall from past updates, is precisely what 
we don’t need.  The corn and soybean crops in these states were 
recovering a bit from their trouble-laden, late plantings this spring 
and early summer.  Fran’s residual moisture and some warm, dry weather 
gave them an additional boost.  But to bring these crops to maturity, a 
late frost arrival date is almost mandatory.  A trader for Dean Witter 
Reynolds, Vic Lespinasse, said that , if a freeze happens on Sept. 23 
and 24, “that would be it”  for the corn and soybean crops, according to 
the WSJ.   

In the same September report, the Agriculture Department lowered its 
estimate of the potential soybean harvest by 1.3% to 2.27 billion 
bushels.  Even if this modest harvest is realized, by next summer U.S. 
soybean supplies will shrink to a 20-year low.  

The spring-planted wheat crop harvest in the Northern Plains is going 
well, prompting the USDA to raise its production estimate by 2% since 
its August estimate.  This will provide some comfort to the nation’s 
wheat stocks which are currently at 50-year lows.  This year’s crop will 
not, however, restore stockpiles to what is considered a desirable 
carry-over.  Next year’s wheat crop, especially winter wheat to be 
planted this fall, over-wintered and harvested early next summer, will 
be critical to prevent serious supply problems.  A hopeful sign on this 
front is the recent arrival of heavy, tropical moisture to Texas, 
Oklahoma and Kanas winter wheat growing areas.  If soil moisture 
continues to ease the 11-month drought in this region, successful fall 
planting may be completed on time.  Keep an eye on weather in this area 
of the country, too;  it is very important.

IF the freezes in the Midwest cornbelt states do hold off until late 
Oct. to early Nov., we will be feeling the grain and bean shortage pinch 
as moderate food inflation. If a freeze kills these crops before a 
successful harvest, food prices will rise dramatically. Last year’s 
retail food price inflation was 2.8%.  This year’s estimates range from 
4% - 6% among most analysts, and up to 10% among the more pessimistic.  
Foods especially affected in 1997 will be dairy products and meats, 
reflecting the high quantities of feed necessary to turn vegetation into 
food on the hoof. Dairy farmers are already receiving 14.8% more for 
their milk than they were last year, and that doesn’t even cover their 
feed cost increases.  As a result, many are reducing their milk output. 
 Look for further trickle-down effects in the prices of cheeses, yogurt, 
ice cream, etc. Likewise, beef herds have been trimmed dramatically 
which will result in tighter supplies and higher prices in ‘97.  It may 
be a great year to get serious about lowering the old cholesterol or 
losing that extra weight....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 report may be reprinted if both copyright and Sig. File remain 
intact.