Weather warning: Midwest due for serious drought

URBANA – A popular Iowa State University agricultural meteorologist says the Midwest is overdue for a serious drought.

But Doane Advisory Services market economists say corn prices, which got a substantial boost last year from the hot ethanol market, will remain relatively high even if that drought doesn't materialize and yields are high in 2007.

At a recent Doane meeting at Urbana, Dan Manternach talked about Iowa State's weather outlook prepared by longtime meteorologist Elwynn Taylor, an outlook he said he pays particular attention to because of Taylor's track record.

Manternach, Doane's ag services director, said Taylor believes in 18-year weather cycles and the current one started with the drought of 1988, so that means the past growing season should have been dry. But an El Nino that started in July last year made a different in that outcome, he said.

"But it's fading,"Manternach said. "Taylor's now saying there's a 54 percent chance 2007 yields will be above normal, but if the El Nino continues to fade, he's going to predict there's a 70 percent chance they'll be below normal."

Historically, the U.S. hasn't experienced widespread droughts during an El Nino, an unusual warming of Pacific Ocean temperatures.

Manternach said farmers struggled during droughts in 1980, 1983 and 1988, but yields have only been subpar two years since then.

"We're overdue for a dry year," he said.

Manternach said Taylor considers the most reliable weather indicators to be existing soil moisture followed by the 18-year cycle and El Nino and La Nina patterns.

Manternach said current National Oceanic and Atmospheric Administration outlook maps suggest precipitation will be below normal and temperatures will be above normal in the Midwest through June. But NOAA's maps of soil moisture show Midwestern soils are now fully recharged.

"That's most important," he said. "We're in a lot better shape than we were going into 2006 in subsoil moisture, so that suggests there's good yield potential."

Doane's Dave Asbridge, an economist, said regardless of the weather, the outlook for corn prices is positive.

He said the amount of corn used to produce ethanol increased by 20 percent last year and is expected to increase by 30 percent in the 2006-07 growing season. Doane analysts expect that ethanol use to increase to about 3.7 billion bushels in 2008-09, up from only a few million bushels in 1980.

"Corn acreage needs to rise," Asbridge said. "Within five years, we're going to need 88 million acres."

Farmers planted 81.8 million acres of corn in 2005-06.

Asbridge outlined three different yield and price scenarios to give farmers some idea what might happen if growing season weather is poor, average or excellent.

He said if yields are low, averaging about 140 bushels per acre, farmers might expect market prices in the $4.25 per bushel range. If they're average, about 155 bushels per acre, Doane analysts expect prices to be about $3.30 per bushel. And if yields are excellent, in the 162-bushel range, they expect prices to be about $2.85 per bushel.

Asbridge said he expects strong corn prices to prop bean prices up even though the demand for soybeans isn't as high. Declining acreage, with much of it going to corn, will help, he said.

Doane analysts say if bean yield averages are lower than average, about 39 bushels an acre, they expect prices to be in the $6.50 per bushel range.

If the weather and yields are average, about 42 bushels an acre, prices will be in the $6.25 per bushel range, and if yields are high, about 44.5 bushels per acre, analysts expect prices to be about $5.75.

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