The bulk of crop sector's pain from 2012 drought is yet to come?
As production by non-US farmers increases, so does their exports. While the US dominated corn exports in the world beginning in 1971, the same is no longer true. In 2010, non-US corn exports were 1.8 billion bushels. By 2012 that number was 3.0 billion bushels, while US drought ravaged exports were a paltry 715 million bushels.
In 1979, US exports accounted for 10.04 percent of the world’s use of corn. By 2010, that number had fallen to 4.34 percent. As the advantage the US had in corn technology has spread around the world, corn exports have fallen both in absolute terms and as a percentage of world use of corn.
In the decade years following 2000, the use of corn for ethanol increased from 630 million bushels to just over 5 billion bushels, falling back slightly in 2011 and 2012. With corn ethanol hitting the blend wall it is hard to see how this rate of increase can be sustained in the future.
As corn yields continue to increase, a downward pressure on prices seems inevitable. If corn prices hit a trough that is below the cost of production, crop insurance will no longer provide farmers with the safety net they saw in the drought year of 2012.
Source: Daryll E. Ray and Harwood D. Schaffer, Agricultural Policy Analysis Center, University of Tennessee
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