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Posted 13 July 2012 - 12:40 AM
USDA lowers its corn forecast 12% to 12.97bn Bushels; the projected yield is cut 20 bushels/acre to 146 bushels, “reflecting the rapid decline in crop conditions since early June and the latest weather data..” Crop conditions for corn and soybeans fell another 8 this week to 40% rated good or excellent for both crops. Unlike 1988 there is no farmer owned reserves available. Polls and surveys of farmers suggest even the 146 number is too high. A look at the latest map and this Reuters report on southeastern Iowa suggests that key area of the crop belt may be in serious trouble. The belt is forecast for only minor rain relief seen in next 7-10 days.Although there is much focus on non-farm payrolls, approximately 2-3 percent of the population is directly employed in agriculture. In 2010, there were 1,202,500 farmers, ranchers and other agricultural managers and an estimated 757,900 agricultural workers were employed in the US. The median pay of ag workers was $9.12 per hour or $18,970 per year.Although farmers typically don’t show up on unemployment rolls, the effect of drought on income is a different story. In January the USDA projected a farm income of $91.7 billion.Two prominent ag economists have addressed the issue of farm revenue in the wake of the drought. Chris Hurt at Purdue said, “Farmers face a double whammy if the drought persists. On one hand, they could fail to produce enough crops to meet their contractual obligations. On the other, they could lose additional revenue if prices rise above their locked-in rate.”A few days later University of Illinois ag economist Gary Schnitkey said, “Farms that do not have crop insurance at high coverage levels are more at risk for low incomes. However, price increases may offset some of potential decreases in yields. This offset assumes that not much of the 2012 crop has been already priced at what could turn out to be lower prices than during the fall of 2012. As a result, farms that did not purchase crop insurance and have hedged a great deal of the 2012 crop are particularly at risk for lower incomes in 2012.”In 2012, 78 percent of the corn acres in Illinois were insured, but deductibles are typically high.
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