Prices jump as USDA lowers yield prediction for corn harvest

JEFFERSON CITY, Mo. -- Farmers in Missouri and nationwide are harvesting a disappointing corn crop this season, which may translate into higher bills at the grocery store.

The U.S. Department of Agriculture on Friday cut its previous predicted harvest yield by 3.8 percent. Traders at the Chicago Board of Trade, who had expected a smaller reduction, sent December corn contracts up 30 cents to their daily trading limit. Prices continued to rise in electronic trading and into Monday, though increases eased by the day's close.

Traders and economists expect strong demand and tight supplies to keep prices up.

The U.S. harvest is still expected to top 12.7 billion bushels, the third-largest crop on record. By comparison, on Aug. 12 the USDA predicted a record crop of nearly 13.4 billion bushels on a yield prediction of 165 bushels per acre on average.

The USDA now pegs the average U.S. corn yield at about 155.8 bushels per acre, down 6.7 bushels from last month. The yield trails by 8.9 bushels last year's record of 164.7 bushels.

In Missouri, corn farmers report getting about 134 bushels per acre, down 19 bushels per acre over a year ago, according to the Missouri branch of the USDA's National Agricultural Statistics Service.

Though farmers planted more corn than ever before, a wet spring, early summer and a hot, dry August across the Corn Belt prevented many plants from maturing as expected.

Peggy Smart, of Smart Brothers Farms in Mokane, Mo., said her corn crop was disappointing.

"We had everything from 150 bushels down to 80," Smart said, noting a more normal crop would have made about 200 bushels per acre in the Missouri River bottom land her family farms just across the river from Jefferson City.

"We had a lot of bad grains, which I would say is from too much moisture ... and maybe the humidity pulling the nitrogen out of the soil. ... We're not really sure."

Smart's story seemed to repeat itself across most of the central part of Missouri as heavy rains in the spring and early summer raised water tables and stunted corn growth. Flooding was a problem along the Missouri in western and northwestern Missouri. Smart said water seeped through central Missouri levees and flooded some of her corn.

Statewide, the agricultural statistics office estimated that 90 percent of the corn has been harvested in southern Missouri, about 70 percent in central Missouri and 40 percent in northern Missouri.

For Missouri, USDA expects the corn harvest to come in at 409 million bushels, down 9 percent from 2009.

Roger Caffrey, who watches grain figures for MFA Inc., said corn prices have been moving higher throughout the summer, but with Friday's announcement by USDA, traders jumped into action.

"You had the speculative element in there buying, buying, buying," Caffrey said. "And I think you had a few farmers make some money over the weekend."

The reduced corn harvest, along with increasing demand for animal feed, exports, and a steady demand on corn for ethanol will lower U.S. grain inventories at least in the short run, which could cause corn prices to continue to rise, Caffrey said.

Increasing grain prices will also show up in the grocery stores, Westhoff said.

Prices for meat and other farm products have stabilized since a spike in prices caused by the onset of the 2008 recession and the jump in oil prices, but prices are bound to go up as the cost of feeding livestock increases, he said.

"It depends on the commodity," Westhoff said. "If you're talking about chicken, the increased production cost can be seen quickly because of the short life span of chickens. It could take up to a couple of years for the higher prices to hit beef and pork."

But it appears food prices are already on the way up. The Missouri Farm Bureau's third-quarter Marketbasket Survey, an informal survey of the price of 16 food items consumers use most, shows prices went up $4.08 over the previous quarter.

"Much of the increase in prices is a result in a rebound of meat prices from the historically low prices of one year ago," said Diane Olson, director of promotion and education for the Missouri Farm Bureau. "Shoppers paid more for sliced deli ham, ground chuck, sirloin tip roast and bacon this quarter."