REMEMBER THE DROUGHT?

Time for some more dot connecting. The crop situation ccontinues to worsen. The corn and soybean crops will be the lowest in decades. The prices you pay in the supermarket lag because food producers generally hedge their prices for six months. The rising prices will not fully hit your pocketbook until 2013. The high price for feed has forced ranchers to slaughter cattle and pigs sooner than normal, creating a glut and lowering prices short term. The price of meat will soar next year.

The world is already a powderkeg, with the Middle East on the verge of explosion, Europe falling into an abyss, and China in the midst of a shadowy leadership transition with an imploding economy. The U.S. is the biggest exporter of corn and soybeans in the world. Higher prices and lower supply will cause starvation in many countries around the globe. Nothing like desperation and lack of food to set off the powderkeg. Combine that with our elections, the fiscal cliff and the debt limit and you’ve got the makings of the next nasty phase of this Fourth Turning.

But at least the stock market is soaring and Bennie will provide QE3 tomorrow. Party on Garth.

Government Lowers Crop Yield Forecast Again

By RON NIXON

Published: September 12, 2012

WASHINGTON — The Agriculture Department on Wednesday slightly lowered its estimates of corn and soybean yields from its forecast last month as record heat continued to batter crops in the Midwest, making it likely that farmers will bring in one of the lowest harvests in years.

The new estimates, which are published monthly, mark the third report in a row in which the department has lowered its forecasts for this fall’s harvest of corn and soybeans.

The new data suggested that customers would pay more at the grocery store next year as the price of corn and soybeans —  major ingredients in processed food, animal feed and biofuels —  rise to record levels.

The corn crop yield is expected to be 122.8 bushels an acre, the lowest in 17 years, and corn prices are projected to reach a record $7.20 to $8.60 a bushel, the report said. A month ago, the government said that the yield would be 123.4 bushels an acre. Jerry Norton, an analyst with the Agriculture Department, said the forecast for corn production was generally within the range of expectations. “It’s unlikely that we will see any big changes from here on,” Mr. Norton said. “A lot of the effects of the drought are reflected in what came out today.”

The corn crop for this year had been projected to hit a record 15 billion bushels, as farmers had planted the most acreage in nearly 70 years.

But as record heat set in, projections of a bumper crop were cut.

Remnants of Hurricane Isaac brought much-needed rainfall to a large portion of the country last week, including parts of the Midwest, but the rain will have little effect on the corn crop, which had already been damaged because of the record heat.  About 52 percent of the corn crop is currently rated in poor or very poor condition, unchanged from a week earlier, according to the Agriculture Department. The report said soybean production is expected to be 2.634 billion bushels — 58 million bushels below last month’s government estimate. Soybean prices are expected to be $15 to $17 a bushel, unchanged from last month, the government said.

Rice production was one of the few bright spots in the report. Farmers are expected to harvest a record 7,334 pounds per acre, up 138 pounds from last month’s estimate.

The United States is the world’s largest exporter of corn and soybeans. The report said exports of both crops would be substantially lower than last year, which could have a devastating effect on countries, including China and Mexico, that depend heavily on American exports. The government estimated that corn exports would be 50 million bushels lower because of drought conditions and competition from cheaper South American supplies. Soybean exports are down 55 million bushels largely because of the drought, the report said.

Eric Munoz, a senior policy adviser with Oxfam, said the reduction in exports for corn and soybeans means American food aid will reach fewer people. “It’s certainly a danger since several developing countries that get food aid are dealing with limited supplies and rising prices,” Mr. Munoz said.

Because of higher feed cost, the report said beef and poultry production is expected to increase this year as livestock producers cull or sell their herds. But prices for beef and poultry are expected to rise 4 to 5 percent next year.  Eggs, milk and pork production are expected to decline because of the increase in feed prices.

The new estimates from the Agriculture Department are based on surveys of farmers and its own inspections. The report provides the most authoritative view yet of crop damage since the drought began in May.