By STU ELLIS
Earlier this year when theoretical numbers were being assembled to gauge the 2011 corn crop, it was estimated at nearly 13.5 billion bushels to supply the demand that was just below that level. After all a trend line yield of nearly 160 bushels per acre and 84 million acres of corn would be just enough with little to spare.
Then came the incessant rain in the Eastern Corn Belt which prevented timely planting from Illinois through Ohio. Then came the late spring floods along the Ohio River and Mississippi River and the flooded acreage. Then came the early summer floods along the Missouri River and more flooded acreage. Then came the satanic weather pattern that baked the usually abundant Central Illinois crop.
While eyes were focused on the weather, the United States Department of Agriculture adjusted its corn crop projections downward and the August estimate had dropped to just under 13 billion bushels, with little reduction in demand. That is because corn buyers had not reacted yet to the rising prices that would soon ration the demand.
Now the September crop report has taken another 442 million bushels from the supply estimate while the higher prices pare down the demand by 400 million bushels. Ethanol will use less because of fewer driving miles by motorists. High prices will reduce industrial demand. And because the Texas drought is sending so many cattle to market now, there will be fewer on hand later in the year to consume corn, so feed use will decline.
The result is less corn to go around, and anyone wanting some will have to pay a higher price for it. That is the supply and demand theory of the market.
Is this year an anomaly in which we will produce somewhere just above 12 billion bushels of corn? Or was 2009 an anomaly in which we produced just over 13 billion bushels of corn? In all likelihood it is the former, because increasing yields in corn production have been the trend. But at the same time the increasing demand for corn has been rising faster than the supply.
Every family has felt that pinch in which expenses rise faster than the income to cover them, and that is the way it currently is with corn. Demand is good. It is much better than the supply-management government policies of prior generations. But we cannot afford to have years of short supply such as now, when there will only be 18 days worth of corn left when the marketing year ends a year from now.
Actually we may not even have that much. USDA's supply demand balance sheet says there will be 672 million bushels of corn left next Aug. 31, but because that is the minimum amount to keep the corn pipeline flowing in this country, USDA cannot reduce that carry over any further, whether the corn exists or not.
Somewhere around the world last Thursday, a child was born who raised the Earth's population to 7 billion. That child will not tip the balance, but will be an exclamation point that our productive capacity for food has to increase. That is going to require funds for research to increase yields, research to produce corn with less water, and produce food without some of the regulatory controls that restrict production because it generates dust when crops are planted and harvested.
In the coming year our focus on those priorities will be underscored by the dwindling supply, and the need to produce an even larger crop in 2012, to meet the increasing demand.