Corn Belt Disaster Continues: USDA Corn Projections are Still Too High (CORN)

July 17, 2012 12:24 PM EDT
The ongoing drought in the Corn Belt is likely to further drive down crop yields, according to report today from Alex Sosnowski, Expert Senior Meteorologist for

This year U.S. farmers planted more corn than at any time since the 1930s, and early predictions called for a record crop yield. In June, the USDA was projecting a record 166 bushels of corn per acre to be harvest this fall. Due to drought conditions, that projected yield has been pushed down to 146 bushels per acre as of mid-July. As a result, corn prices spiked. agricultural meteorologists expect the actually figure to be closer to 138 bushels per acre. The lower yield compared to the USDA projection is based on AccuWeather's forecast of ongoing heat and drought conditions in areas from southern Illinois westward to Missouri, Iowa, South Dakota, Nebraska, Kansas, southern Wisconsin and southwestern Minnesota. The bottom line is there simply isn’t enough rain to produce a healthy crop.

Lower yields could continue to translate to higher prices per bushel. The corn futures market this week was fluctuating near the record at approximately $8 per bushel.

"This, in turn, will translate to higher prices for the ingredients that make up much of food supply from animal feed to processed products for human consumption," said Alex Sosnowski.

"Eventually, these costs will be passed along to the consumer in the form of higher food prices. Fuel prices can also be impacted to a lesser degree, since gasoline in the U.S. contains between 5 and 10 percent ethanol, a product of corn."

Teucrium Corn ETF (NYSE: CORN) is higher by 35 percent in the past 30 day. CORN is higher by 0.75 percent intraday on Tuesday.

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