Corn Prices Soar as Bad News Spreads

By David L. Brown

The flooding in the Midwest is just the last straw for hopes of a decent corn crop in 2008, and the markets have responded by sending the price of corn to over $8 a bushel. Here is an excerpt from the Reuters story on this:

CHICAGO (Reuters) – The worst flooding in the U.S. Midwest in 15 years sent fresh shocks to global markets and consumers as corn prices hit record highs on fears of crop losses in the heart of the world’s top grain exporter.

The price of corn at the Chicago Board of Trade soared above $8 a bushel for the first time as relentless rains and overflowing rivers raised fears that Midwest farmers will not be able to grow much of anything on as many as 5 million acres.

“The market is being driven by water,” said Glenn Hollander, a veteran grain merchant on the CBOT trading floor.

“Estimates show 3 million acres of corn under water and probably 2 million didn’t get planted. So that gets you up to 5 million or over 700 million bushels, and that takes out the entire carry-out,” he said, referring to estimates for grain stocks carried over to the next crop year.

Overwhelmed river levees across Iowa and Illinois, which produce about a third of U.S. corn and soybeans, have also displaced thousands of people.

It is pretty much too late to replant fields that were flooded out, or that have not been planted because of continued rainfall through the Spring. According to this article on the ScienceDaily web site, fields that are planted to corn or soybeans now can be expected to yield no more than 50 percent of usual amounts.

The article quoted Illinois crop scientist Emerson Nafziger, who noted that based on past experience, when corn is planted between June 15 and June 20 “we can expect 50 percent of the maximum yield.” This year saw the third wettest period from January through April since 1895 in Illinois. Nearby Iowa has received 400 percent of average rainfall year-to-date, and as we have reported is now being ravaged by floods and with more than half of its corn and soybean fields under water as of a few days ago.

In Illinois, a major corn state, 95 percent of corn fields have been planted and 88 percent have sprouted — but “less than half of that is reported to be in good or excellent condition,” ScienceDaily says. Fourteen percent of the planted acres are in poor or very poor condition and may have to be replanted. On June 9 Illinois corn averaged only seven inches high, versus an average 17 inches by this time in recent years.

Soybeans are in even worse shape, with only two-thirds of the crop in Illinois having been planted by June 9, compared with an average of 92 percent by that date in recent years. Nafziger said that farmers in the southern part of the state who get soybeans planted by June 25-30 may expect to get 50 percent of normal yields.

We have been raising concerns about the possibility of a poor harvest for some time here, and this season is shaping up as a disastrous one. The eight dollar price of corn puts a stake in the heart of the ethanol industry, fulfilling predictions made here (see my essay “Ethanol Craze Running Into Brick Wall,” posted May 5). With a number of new ethanol plants expected to come on line this year, it was projected that this source would take a third or more of the 2008 corn crop. But despite government subsidies for ethanol, at $8 corn prices they are money losing propositions.

Meanwhile, declining food reserves and the continuing surge in commodity prices makes it clear that turning food into fake fuel is an idea whose time has come … and must soon be gone. When news starts to trickle in from all around the globe about spreading famine, no doubt accompanied by riots and revolution, the image of American farm crops being converted into alcohol to power SUVs and gas guzzling cars will make our nation a pariah. This is a public relations disaster that is about to break, and the best course would be to stop it now. Once the news of famine starts to appear on the nightly news, it will be too late.

Unfortunately, those who are involved in the production of ethanol, something that a top UN official has termed “a crime against humanity,” have resisted facing the fact that their decisions to build dozens of new distilleries were poor ones. During the recent food conference in Rome, spokesmen for the ethanol industry poured out a flood of publicity claiming they were being made the victims of a “smear campaign.”

Well, they wouldn’t stop turning food to fuel when it was the right thing to do morally and ethically, but now it seems likely that they will stop on economic grounds, since high crop prices make the process unprofitable. Val Germann reports that a bio-diesel plant under construction in his home town in north central Missouri is at a standstill and “the word on the street” is that it will never be completed. Bio-diesel depends on soybeans to produce fuel, and just as corn prices have zoomed upward, soybean prices have also soared. I suspect that pattern is being repeated wherever bio-diesel or ethanol plants are under construction, and those still in the planning stage will never be built. The future for fuels made from food is bleak indeed, and I say good because the proper function of agriculture is to feed people, not vehicles.

As far as our nation’s image, it would be a very smart thing for the government to immediately stop paying subsidies for ethanol production. This is a very bad idea that should never have been allowed to take off in the first place, and it should be shut down as quickly as possible. Our “leaders” probably won’t take this action, but what they should do is to declare right now that not a single kernel of American corn will go to produce ethanol. That not a single soybean berry shall be turned into bio-diesel fuel. Hungry people around the world should come first, and for the US to do otherwise than to stop this atrocity immediately will yield nothing but rage and indignation from every corner of the planet.

Ethanol distillers like to claim that they are doing something about our nation’s energy needs, but in fact the entire thing is based on greed. Some analysts claim that more energy is expended in the production of ethanol than is produced in the final fuel, which makes the whole thing ridiculous.

The deteriorating situation across the farm belt is not necessarily over yet. Flood crests are only now beginning to spread to the Mississippi Valley, and as Val Germann reported here yesterday, the Missouri River is out of its banks in many areas of Missouri, another state where crops have been delayed and damaged by unceasing Spring rains. There could be more wet days in store, or alternatively the Summer could turn excessively hot, further depressing potential crop yields.

Many dates stand out in history. Think of 1066 when England fell to the Norman Conquest; the fateful year of 1776 when our nation was born; 1914 when modern warfare erupted; and many other important dates in history. There is little doubt that 2008 is shaping up as such a date, and as a major one, a historic turning point in world history. It looks to be the year when the predictions of Thomas Malthus, Paul Ehrlich and others began to emerge into reality.

Those predictions, of course, warned that human numbers would eventually outgrow the ability of the Earth to sustain them. Well, that is exactly what is happening right here, right now, right on our own Planet Earth.

This entry was posted in Agriculture Issues, Conflict and War, Famine. Bookmark the permalink.