Farmers 'Nervous' Over This Year's Crop Season
Nerves are on edge across the heartland, especially after the National Oceanic and Atmospheric Administration announced Thursday that it expects little relief from the drought over the next three months.
Still, farmers are projected to plant more than 97 million acres of corn this year, the most since the 1930s. Wells Fargo predicted corn prices could fall to $6 a bushel, considerably lower than where they are now, though still historically high.
Farming is a lot like housing. It's all about location, location, location. In the case of agriculture, the best location is usually the place where Mother Nature chooses to send rain.
"This winter we have had some precipitation, but I would still say we are still 12 inches below normal," said Nebraska farmer Jason Kvols.
He had a terrible 2012. Kvols expected to yield 150 bushels per acre of corn, but because of last summer's historic drought, he ended up with half that. Crop insurance helped cover some of the losses, which is one reason he's buying more of it in 2013. "I'm a bit nervous."
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But, not everyone's worried.
"The corn crop right now as a whole looks excellent for this year," said Curt Mowery down in Texas. He's already planted a new crop. Unlike Jason Kvols in Nebraska, Mowery said 2012 was his best corn crop ever. "The rains were timely on it."
It's not only grain farmers hoping for a better 2013. The livestock industry is seeking relief from high feed costs. Bob McCan is President-Elect of the National Cattlemen's Beef Association, and he runs between 3,500 and 4,000 head of cattle in Victoria, Texas. That's down from 5,000.
Reuters reported the nation's cattle herd is smaller than it's been in decades, as ranchers got rid of animals because it cost to much to feed them.
"Until there's some really good relief in the drought situation it's going to be hard to rebuild the herd," said McCan.
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McCan is also concerned about the impact of the sequester. The USDA plans to start furloughing meat inspectors one day a week starting in July. Packing plants can't process beef without an inspector on hand, and the furloughs will slow down supply coming into the market. "We're worried the price of beef may go up substantially because of that."
The sequester is also forcing the USDA to suspend monthly milk production reports, which may make it difficult for restaurants to figure out a fair price. "We're concerned that the lack of clarity in these markets could lead to an intensified upward move in the dairy markets," said David Maloni, economist for the American Restaurant Association.
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However, Maloni is optimistic about what this year's corn crop may do to reduce the cost of beef, pork, and poultry. "We expect corn could be in the $4s by the end of the year," he said. "This could be the start of something, like we tell our clients, beautiful for the restaurant industry and major commodity food buyers."
(Read More: Goodbye, Drought; Hello, Bumper Crops)
A good crop could also help rebuild the nation's level of corn stocks from historically low levels. Curt Mowery added that drought is not just a U.S. problem, it's a global one. "If anybody has a marginal or a total crop failure, it's going to start impacting worldwide the availability of those commodities on the food shelf," he said. "It's that critical. I've never seen that in my lifetime."
—By CNBC's Jane Wells; Follow her on Twitter: @janewells