In 2012, corn farmers planted the largest number of acres in 75 years, and yet they are set to have one of the most disappointing harvests in recent memory. Today, the U.S. Department of Agriculture projected that 2012 corn yields will total 10.8 billion bushels, down 13 percent from last year's yield and down 17 percent from July's projection. Soybean yields are also projected to be 12 percent lower than in 2011.
The projections provide the latest picture of the toll that a nationwide drought has taken on America's cash crops. America's farmers are now praying for rain, but even if the storm clouds come, the bad news is that the damage is largely done at this point.
"You start off with a tremendous potential, and everything either holds you steady or declines you," says Chad Hart, extension economist and grain markets specialist at Iowa State University. Beyond today's report, he says, corn yields don't have much potential for improving. However, he also says that he doesn't foresee more large declines.
"A little more is definitely possible. [But] we saw most of the yield decline in corn with this report," he says.
The report from the USDA contains plenty of troubling figures. Average corn yields are expected to be only 123.4 bushels per acre, the worst since 1995. And only 24 percent of corn acreage was rated as being in "good to excellent" condition. Last year, at this time, that share was 62 percent.
Art Barnaby, professor of agricultural economics at Kansas State University Research and Extension, agrees that for the nation's corn crop, yields at this point could easily go downhill, but improvement is unlikely.
"The crop could get smaller with future reports. That's entirely possible, yes," he says. "I think what's out there is out there. Rain at this point probably wouldn't help a lot."
For soybeans, the picture is only slightly brighter. Average soybean yields are also projected to be down significantly, at 36.1 bushels per acre—the lowest since 2003. However, there is still hope for rain to bolster whatever yield potential there might still be in those fields.
"For soybeans, I'm still watching the yield, because if we get good rains here, they could help hold yields where they're at today," says Hart.
All of this could make for shifts in food prices. Aside from being used for a variety of food products and additives, corn and soybeans are also used for animal feed, meaning that a wide range of foods will be affected.
Secretary of Agriculture Tom Vilsack today said that those price hikes won't be coming for a while.
"Americans shouldn't see immediate increases in food prices due to the drought," he said in a Friday statement to the Associated Press. While corn and soybeans are seeing price spikes now, the USDA estimates that meat and dairy prices will likely be impacted within two months, while packaged and processed foods won't see effects until 10 to 12 months out. Vilsack earlier this summer warned Americans to be on the lookout for price gouging, and to "push back" if they see premature increases in their food costs.
Those food price bumps will not just be felt by American consumers, of course. The U.N. Food and Agriculture Organization reported on Thursday that its Food Price Index, a measure of price changes across a variety of commodities, shot up 6 percent in July after three months of declines. This index measures only raw commodities, but it points to higher food prices in the near future for global consumers. The FAO reported that this increase was in part due to drought's effects on global corn prices.
As a result, the U.S. is feeling renewed pressure to divert more of its corn to food. Currently, around 40 percent of U.S. corn is used in ethanol. José Graziano da Silva, director-general of the U.N.'s Food and Agriculture Organization, this week urged the U.S. to change that ratio in an opinion piece in the Financial Times.