By KEVIN WALKER
Michigan Correspondent NEW YORK, N.Y. — The Storm Exchange, a weather-related risk analysis and information service, is more pessimistic than the USDA about upcoming corn and soybean harvests; according to Paul Walsh, the company’s chief strategist and senior business meteorologist, expectations are for a 6 percent decline in the corn yield this year.
The company analyzes conditions from a weather risk angle, spotting two main risks to the economy this year because of weather conditions: One, low corn and soybean yields due to cold and wet weather in the Midwest; and two, an economic shock due to a hurricane strike that would impact the country’s energy infrastructure.
“As it turns out, both of these risks are actualizing and it looks like it may have long-term implications, though interestingly, it looks like the corn and soybean yields shortfalls will have a bigger impact than the very dramatic impact of (hurricanes) Ike and Gustav,” Walsh said in a recent telephone conference.
Jim Hilker, an agricultural economist from Michigan State University, doubts the 6 percent decline in corn yield.
“Could it be? Yes, but I don’t think so,” Hilker said. “Not very many people are saying that.”
Hilker is surprised that corn yields are projected to be as high as the USDA is anticipating, but said knowing how the USDA gathers its information, he doubts it is off by as much as Walsh is projecting.
Walsh also said there are an estimated $8-$18 billion in estimated insured losses from Hurricane Ike.
“It remains to be seen how long it will take to get the refineries back up and running,” Walsh said. “It’s likely we could have about five more named storms before the end of the hurricane season.”
Walsh projected a lower soybean harvest as well. The reasons for the lower yields include flooding and cold weather during the planting season, drought during the accruing season and the increased likelihood of a killing frost between now and the harvest in mid-October, because the crops went in so late.
The remains of what had been Ike had a significant negative impact on the corn crop, according to Walsh. The remnants of the storm wound their way through Missouri, Indiana, Illinois and up into Michigan, where 60-70 mph winds and very heavy rain “basically knocked down the crops.”
Walsh described this as “the final insult to the season.” Hilker took a more cautious approach to the corn yield this year.
“My guess is we will not get a real good feel for the actual 2008 U.S. corn yield and total production until the October USDA Crop Production report,” Hilker wrote in his Commodity Market Outlook for Sept. 12. “The August report was a surprise, since the projected 2008 yield at 152 bushels an acre would be the second highest on record, even after all the early season trouble, but good weather after that.
“However, much of the Corn Belt has been quite dry since August 1, and the crop is late. On the other hand, the weather has been great for others and it doesn’t look like an early frost.”
In his report Hilker also stated that the market will have “another chance to react” when the USDA’s Sept. 1 Grain Stocks report is released on Sept. 30. Hilker wrote that he and the USDA expect the ending stocks figure for the 2007-08 corn marketing year to be about 1,576 million bushels.
“At this time I do not expect a surprise; exports and uses other than feed seemed to have come in on target,” Hilker wrote. “But I would not be surprised to see a shock.”
To see more of Hilker’s Market Outlook and Probabilistic Price Forecasts for Grain and Livestock, go to www.msu. edu/~hilker and for more on the Storm Exchange, go to www.stormexchange. com |
