WASHINGTON -- Hot weather is expected to reduce corn yields in this fall's harvest, raising prices for farmers in a recovery from the depressed markets of recent years. Soybean prices are also forecast higher.
"It's not a strong turnaround, but it does indicate that we have reached the bottom and we're on our way up," said Larry Salathe, senior economist at the Agriculture Department.
The department on Friday projected corn production this year at 9.27 billion bushels, down 7 percent from last year and 2 percent below 1999. Corn yields were pegged at 133.9 bushels per acre, down 3.2 bushels from a year ago.
Because of the lower production and world demand, the Agriculture Department raised projected corn prices by 15 cents to an average price of $2.10 per bushel.
The report is good news overall for Minnesota farmers, said Wells Fargo agricultural economist Michael Swanson. He said the low yield, coupled with the price increase, means a good financial outlook for farmers who get at least decent production.
The corn industry has been suffering from oversupply in recent years, Swanson said, so the low yield is "the best situation we could have."
"But if you're the farmer with little to no production and poor crop insurance, then you probably have the opposite point of view," Swanson said.
Corn yields are down in the central and eastern corn belt as well as the southern Plains, but in the West and Southeast the corn crop has rebounded from last year's drought, according to the report. Hot weather is mainly to blame for the lower yields on almost 70 million acres of farmland planted in corn for grain.
Weather has feen near ideal for corn over the past four years, producing bumper crops that resulted in huge inventories, depressed prices and lower farm income. Congress has approved four straight farm bailout packages, including $5.5 billion for this year.
"Normally, we would expect one out of every five years to be a bad weather year. We've had an unusual string of favorable weather conditions," said Dan Zwicker, market analyst at AgriVisor Services in Bloomington, Ill. "We are in a situation where overall prices should trend higher over the next several months."
Although the projected soybean harvest of 2.87 billion bushels would set a record, strong world demand for soybeans and higher prices for oil led the Agriculture Department to boost soybean prices paid to farmers by 35 cents per bushel, to an average of $4.85.
The production figure, if realized, would represent an increase of 4 percent over the 2000 crop. Yields are also up slightly to 38.7 bushels per acre, which would be the third-highest ever. About 75 million acres of farmland are planted in soybeans, a 1 percent increase from a year ago.
Despite the optimistic price projections, some economists say weakness in the overall economy and the dollar's strength abroad make it doubtful the farm economy will recover permanently. In fact, one economist said the government bailouts have had the effect of propping up more small farmers who are likely to eventually fail regardless.
"The long-term trend is to move to a more consolidated, more efficient overall segment in the farm sector," said Lynn Reaser, chief economist at Banc of America Capital Management in St. Louis.
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