The Drought of 2012revisited

AG BM 102

Corn Supply (Bil. Bu.)Year Beg stocks Production Supply

2007/08 1.30 13.07 14.36

2008/09 1.62 12.09 13.73

2009/10 1.67 13.10 14.77

2010/11 1.71 12.45 14.18

2011/12 1.13 12.36 13.51

2012/13 0.99 10.78 11.93

2013/14 0.72 13.76 14.51

Source: USDA

Corn Usage (bil. bu)

Source: USDA

Year Feed Food Fuel Exports Total

2008/09 5.18 1.32 3.71 1.85 12.06

2009/10 5.13 1.35 4.59 1.98 13.07

2010/11 4.79 1.41 5.02 1.84 13.05

2011/12 4.55 1.39 5.00 1.55 12.66

2012/13 4.45 1.40 4.65 0.72 11.22

2013/14 5.10 1.45 4.90 1.22 12.68

Food and Industrial Corn Usemil. bu.

CropYear

HFCS Other sweeteners

Starch Fuel Liquor Cereal

2007 490 236 262 3,049 135 192

2008 489 245 234 3,709 134 192

2009 513 257 250 4,568 134 194

2010 521 272 258 5,021 135 197

2011 495 285 250 5,000 135 201

2012 465 285 235 4,500 135 205

Source: USDA

Corn UsageCrop 2004 2007 2011 2013

Feed 57.8% 46.0% 36.3% 40.2%

Food 12.6% 10.4% 11.4% 11.4%

Exports 17.1% 19.0% 12.3% 9.7%

Ethanol 12.4% 24.7% 40.0% 38.6%

December Corn Contract August 23

Effect of 2012 Drought on Farmers

• Crop farmers– Without crop insurance huge losses

• Animal farmers– Major inputs much more expensive– Cow-calf operators – lack of grass extremely serious –

western plains– Although animal prices will rise, not immediately –

asset fixity– Generally losses esp. for those buying lots of feed

(California dairy farmers)

2013 Crop

• Corn & soybeans much lower – much bigger crops

• Dry weather in western Corn Belt an issue• Also wet weather in South

Some important points

• Farm prices are MUCH more volatile than retail prices!

• Consumers can adjust their consumption easier than a farmer can adjust a feed ration

• It is a global market for most ag products• Drought induced Brazil to raise corn – in

future US share will be smaller

US65%

Argentina22%

Brazil9%

Other4%

World Corn Exports2009 Crop Year

Source: USDA