Poor crop production pushes prices up
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Poor crop production pushes prices up

Date: September 1, 2011
By: Mengti Xu
State Capitol Bureau

JEFFERSON CITY - Crop farmers are struggling against hot weather in Missouri, and crop production in many areas has been strongly affected, the U.S. Department of Agriculture says.

USDA said the percentage of crops being reported as poor or very poor has increased. This descending condition of production brings less income for farmers and drives prices up due to high demand of agricultural goods from consumers.

Most of the areas in Missouri have suffered from severe dry weather, especially in July. Bob Garino, deputy director of the USDA National Agricultural Statistics Service, said in the last crop report forecasted a crop yield of 125 bushels per acre, similar to the outcome of last year, which was also a down year. Typically a good crop yield in Missouri is around 150 bushels per acre, he said. 

The decreasing crop production has an impact on the local business, particularly on farmers' incomes.

"Unfortunately, for farmers right now, the crop prices are historically high," Garino said. "It will generally bring less money than a good deal does."

When the high crop prices hit a farmer's profit, the next crop estimate will tell more about what is going on in crop market. Although crop prices are more determined by the U.S. level, the amount of the production will play a key role on prices. If the condition of U.S. crops keeps getting worse and the yield continues going down, there will be fewer crops available,  and the supply will be very limited.

"We determine that based on our survey, if the conditions have deteriorated, I will suspect the price will probably react to that in a up fashion," Garino said.

The impact has spread around the whole community, not just farmers. People who want to purchase products of agricultural crops could pay on a higher price.

Moreover, the higher prices will also have some indirect consequences on products made from corn, such as high-fructose corn syrup.When the price goes up for corn, the price of high-fructose corn syrup will go up and any product that uses high-fructose corn syrup will add pressure on the price on that product.    

According to Garino, because the current crop condition is mainly due to weather, many other parts of the country are facing the same problem. However, what is more noticeable now is that facing the high demand for corn, the corn stocks are low. 

"We almost need a bumper crop ever year to maintain our corn supply because the demand is not just for food and for animal feed, but also for ethanol and things exported to other countries," Garino said. "So any time we get a little bit below what we need to get, it puts up pressure on prices."

Now, there is much corn being used for ethanol as being used for animal feed, so it pushes dealers to pay more, which will then push dealers to charge more for ethanol. For the future, it is important to find a way to continue increasing the production to meet the demand the world has for agricultural products, Garino said.

Garino also said there are a lot of people buying agricultural commodities who weren't in the market 10 years ago, and prices are more volatile than prices five to 10 years ago. If the U.S. has a true situation like what happened in 1988 when Midwest production of some crops was down 20 percent, the U.S. crop market will face more price increases to come.


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