The United States Department of Agriculture (USDA) recently reduced its forecast for the fall corn crop to 12.9 billion bushels from 13.5 billion based on damage from spring flooding and summer drought in several key corn-producing states.
Midwest temperatures averaged eight degrees higher than normal in July, while some areas got less than a third of their normal rainfall.
"Corn is dead on some of the sandiest ground and looks more like the middle of October than mid-August. The corn crop is pretty much a done deal," Mike Mawdsley of broker Market 1 told Agrimoney.com.
In addition to lowering its estimate for the fall harvest, the USDA has also lowered its quality rating of the U.S. corn crop. The USDA had rated 70% of the corn crop "good to excellent" as of June 26; that number fell to 60% on Aug. 14 and was revised down to 57% on Monday. Last year, 70% of the corn crop was rated good to excellent.
Many experts believe the USDA has only just begun to downgrade.
"The USDA crop forecast should ...still prove too optimistic, despite the downward revision already made in August,"Commerzbank analysts said.
Another group, MDA Information Systems Inc., has already undercut the USDA's harvest estimate. MDA forecasts a corn crop of just 12.23 billion bushels.
Price PressureThe ever-worsening harvest forecasts have steadily pushed corn market prices higher.
The price of corn has soared 70% in the past 12 months, with futures for September and December delivery well north of $7 a bushel. September futures on the Chicago Board of Trade (CBOT) rose to $7.29 on Tuesday, while December futures rose to $7.42.
That's bad for consumers. Corn is the single-biggest cause of increases in food prices, which are expected to rise 4% for 2011. Analysts expect higher corn market prices to help push retail food prices up another 4% next year.