* Drought expanding into Northwest, worst since Dec. 1956
* Corn ratings fall more than expected, most in nearly 10
* Weather indicates more deterioration for corn and soy this
* More surges likely for corn and soybean prices
By Sam Nelson
CHICAGO, July 16 An expanding U.S. drought, now
deemed the worst since 1956, dealt another blow to the corn
crop, with conditions deteriorating for a second straight week
in the world's top exporter of the grain, U.S. government data
showed on Monday.
There were signs that the drought, which has been centered
in the Midwest, was expanding north and west, putting more crops
at risk including in states like Nebraska where large tracts of
cropland are irrigated by groundwater and rivers.
The National Oceanic and Atmospheric Administration (NOAA)
said in a report on Monday that, based on the Palmer Drought
Index, 55 percent of the contiguous United States was under
moderate to extreme drought in June. That is the largest land
area in the United States to be affected by a drought since
In a report titled National Drought Overview, NOAA said that
moderate to extreme drought had spread across much of the
Midwest and Central to Northern Plains, with pockets of
exceptional drought in the High Plains of Colorado.
The drought, previously considered to be the worst since
1988, has been wreaking havoc on developing crops in the U.S.
The amount of the corn crop rated by the U.S. Department of
Agriculture to be in the good-to-excellent category fell 9
percentage points to 31 percent, well exceeding the 5-point drop
expected by traders polled by Reuters on Monday morning.
The drought also pummeled the soybean crop, which was rated
34 percent good-to-excellent, down 6 percentage points from the
previous week and one point below estimates for 35 percent.
MILD WINTER, DRY SUMMER
After one of the mildest winters on record sparked a record
pace in planting and promised a bumper harvest, a sudden turn to
dry weather in the Midwest has decimated crops.
New-crop December corn futures on the Chicago Board of Trade
have soared 54 percent since mid-June, reaching a contract
high of $7.78 on Monday.
The surge in prices would cut into margins for meat
companies like Smithfield Foods and Tyson Foods
and ethanol producers while raising the prospects for higher
beef and pork prices in the United States next year as ranchers
cull their herds because of high feed costs.
"The drought continues to take a significant bite out of
yield potential," said Dan Basse, president and analyst for
In a report last week, the USDA cut its corn yield estimate
by an unprecedented 20 bushels to 146 bushels per acre, igniting
concerns that this year's crop could mirror production in 1988
when a similar drought decimated the crops.
"I suspect we're getting very close to something in the 132
to 133 yield range, and it's still falling," Basse said.
YIELDS DECLINING; CROP ABANDONMENT LIKELY
"As the crop gets worse, there's an historical precedent for
increased abandonment. If you talk to farmers, they'd tell you
that there's a fair amount of fields being zeroed out by crop
adjusters," Basse said, referring to farmers forgoing their
crops to collect crop insurance.
The top two corn producing states in the country, Iowa and
Illinois, showed huge declines in crop prospects.
Corn in Iowa fell from 46 percent good-to-excellent last
week to 36 percent this week. In Illinois, the crop plunged to
11 percent from 19 percent good-to-excellent.
The crop in Missouri, worst hit by the drought, fell to 7
percent from 12 percent while Kentucky's crop improved slightly
to 6 percent from 5 percent.
At the beginning of the crop season, the USDA rated 77
percent of the corn crop and 56 percent of the soybean crop in
the good-to-excellent category.
The 1988 drought saw sharp reductions in corn and soybean
By this point in the growing season of 1988, 18 percent of
the corn crop and 20 percent of the soybean crop was rated
good-to-excellent, according to USDA data. Crop conditions were
rated lower at the beginning of 1988 than this year.
Extreme dryness and heat hurt crops at first in the eastern
and southern Midwest. Now western and northwestern states such
as Iowa, Nebraska, Minnesota and the Dakotas, all major
producers of corn and soybeans, are being affected.
"Crops in the east already have deteriorated rapidly and now
heat and dryness are stressing crops in the west and northwest,"
said Roy Huckabay, analyst for The Linn Group.
The latest weather forecasts call for the drought afflicting
the U.S. Midwest to worsen, which will worsen destruction of the
country's corn and soybean crops, meteorologists said on Monday.