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Illinois’ drought, meager corn crop will hurt world’s poorest

GraDept. Manager Steve Dennis climbs out an empty graelevator Evergreen FS BloomingtIl. The worst drought since 1988 has meant less

Grain Dept. Manager Steve Dennis climbs out of an empty grain elevator at Evergreen FS in Bloomington, Il. The worst drought since 1988 has meant less corn of lesser quality, which isn't good news for meat producers here and abroad. | Rich Hein~Sun-Times

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50%

The increase in the price
of corn since mid-June.

2.5-3.5%

The expected increase in grocery bills by the end of 2012.

3-4%

The increase in food prices forecast for 2013.

* Estimates from the USDA

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Lynn Sweet on the drought and the election.

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Updated: September 13, 2012 6:04AM



BLOOMINGTON, Ill. — Standing atop the Yuton grain elevator, 180 feet above ground, grain department manager Steve Dennis sees yellow fields where he should be seeing dark green.

And after a quick ride down in a rickety cage elevator, the view below isn’t any better.

Dennis walks on dusty cement inside a 760,000-bushel grain storage bin, stepping on only a few corn kernels that didn’t make it onto steamers bound for China, trains to Mexico or trucks to American ethanol plants.

“Usually, this time of year, it’s half-full,” Dennis said. “There is not a lot of corn. There is a lot of air space.”

Engulfed in corn stalks a half mile away, 31-year-old farmer Clint Kruger looks in vain for healthy ears of corn that, in a typical year, would be harvested, then trucked to the Yuton elevator to be sold for feed or ethanol.

“Corn is done,” said Kruger, a second-generation farmer, husking a pathetic, withered ear, barley 3 inches long, and throwing it on the gray soil.

Over the past decade, his family has averaged 193 bushels of corn per acre each year on their nearly 2,700 acres of corn fields. This year, if luck holds, they’ll harvest half that.

“Some guys think they’ll get 20 bushels to the acre,” Kruger said. “It’s devastating.”

It’s hard to imagine the kernels of corn that didn’t grow on Kruger’s farm, or make it to Dennis’ elevator, could affect the most marginalized people a world away. But the scorching heat baking much of the United States can have a potentially devastating global impact.

Illinois’ fabled corn fields are dry and cracked, the state’s grain bins empty. Less corn means higher prices. And higher prices mean the world’s poorest — who spend as much as 80 percent of their meager daily incomes on food — can’t afford to eat. Desperate, hungry people can rock previously stable communities.

On July 30, the World Bank issued an alert about food price volatility, noting that prices of wheat, corn and soybeans rose 30 percent to 50 percent in June. The U.S. drought is partly to blame, but it’s not the only issue. Heavy rain in Europe and relatively little rain during India’s monsoon season also are affecting global grain production.

The U.S. Department of Agriculture released a forecast Friday, expecting a 13 percent decline in corn production compared to last year. It would be the smallest production since 2006.

“If you have significant producers anywhere in the world having severe crop reductions in an era when you have little reserve stocks, the price can shoot up really easily,” said Robert Thompson, a visiting scholar at Johns Hopkins University who previously worked as the World Bank’s director of agriculture and rural development.

Low reserves

Exacerbating the drought are low levels of “carryout” — the grain left over from last year’s harvest. As the world population soars and several populous countries, including China, are seeing growth in their middle class, meat is in higher demand. And so is the corn used to feed livestock.

Rick Whitacre, an agribusiness professor at Illinois State University, said current carryout levels are “fairly tight” and likely only to worsen after this year’s bleak harvest. Carryout levels are currently estimated at 903 million bushels.

“It’s not a lot of corn,” Whitacre said. “When we’re looking at 900 million bushels of carryout, you have to keep in mind [the global market] consumes 13 billion bushels of corn” a year.

In a typical year, Dennis’ grain elevator would carry over about 20 percent of its product from one year to the next. Last year brought a fair, not good, crop, which depleted carryout.

At the end of July, the Yuton elevator normally has about 800,000 bushels of corn ready to head to market. This year, it holds just 300,000.

“In a good year, we would heal up and add to the carryout number,” Dennis said. “Now, with the drought being so severe, we have the potential of running out. We won’t run out. As the price gets tighter and tighter, it will price itself out of the market.”

The United States is the world’s leading corn exporter, and Illinois is second only to Iowa in the amount of corn exported. In 2010, Illinois exported $1.6 billion in corn grain, according to the most recent figures from the United States Department of Agriculture.

Dennis has seen drought before — in 1983 and 1988. This year, the difference is that the carryout, or surplus grain, isn’t there. And that’s the case in Downstate Illinois as well as throughout the United States.

“The balance has just shifted away from surplus inventory to a very tight supply,” said Darrel Good, an agricultural economist at the University of Illinois at Urbana-Champaign. “We were really counting big-time on a large crop this year to rebuild those inventories. That’s not going to happen now.”

Poor are hardest hit

While food prices on corn-based items, like cereal and beef, are expected to rise modestly in the United States in the coming year, food prices in the world’s most impoverished areas will take a dramatic hit, with potentially devastating consequences.

“Food-based price increases do not hit everyone the same,” said Chris Hurt, an agricultural economist at Purdue University. “They tend to have the biggest negative impacts on the lowest-income families.”

Consider a poor family in rural Mexico, a family who spends 50 percent or 60 percent of its income on food, Hurt said. A family member eats 10 corn tortillas a day.

“That cornmeal that goes into that tortilla is very close to the grain commodity” exported from Illinois and other states, Hurt said. “That price is up 60 percent since June 16. That is really felt by those families.”

Also hurting the situation is that organizations that traditionally provide food relief to the poorest nations can’t buy as much because grains are in short supply and prices are up, Hurt said.

“Food aid is the primary way the world tries to help those at the very bottom,” he said. “Those organizations don’t have unlimited funds.”

For the United Nations World Food Programme, every 10 percent increase in the price of grains and food the organization provides costs the U.N. an additional $200 million a year, said Rene McGuffin, the agency’s spokesperson.

Families who can’t afford even food basics are left making painful choices.

“Families cut the number of meals, eat cheaper, less nutritious meals, they have their kids stop going to school,” she said. “All of these things have longer-term spillover effects.”

In 2008, when a multi-year drought combined with a variety of other factors caused the price of rice to triple, violence erupted.

“You saw food riots in several dozen countries around the world,” Thompson said. “Low-income people didn’t have the purchasing power to access enough to sustain them.”



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