By ANN HINCH
Assistant Editor

INDIANAPOLIS, Ind. — With a preliminary estimate of $840 million in lost row crops across the state, Indiana Agriculture Director Andy Miller said last week, “This’ll likely go down in history as one of the – if not the – worst agricultural disasters our state has seen,” of heavy rains and flooding earlier this month.

This estimate included 529,000 acres of young corn, 485,000 of newly planted soybeans and some winter wheat loss. Miller said according to the USDA’s National Agricultural Statistics Service, this is 9 percent each of the total Indiana plantings of corn and soybeans.

Matt Harrod, Indiana State Department of Agriculture assistant director of research and policy, said trying to quantify losses is “difficult to do, but it needs to be done, to help the public and policymakers get their arms around it.”

He added the $840 million is a conservative estimate based on market prices at the time of loss and does not include ruined land, buildings, equipment, stored grain, other assets or ecological damage.

“Ultimately, you won’t know what crop you have until it’s in the bin,” he said, adding there may be disease issues later this year – from floodwaters stirring up deep soil – that farmers have to address.
While corn continued to surf the commodities markets on record highs before coming back down to just over $7.50/bushel in December futures on June 20, it may not make grain elevators and processors any more willing to give growers futures contracts for longer than 60 days out.

Shawn Hackett, Hackett Financial Advisors president, explained even higher futures prices are making those buyers more cautious. He said elevators and other processors will likely stick to a cash contract beyond 60 days, because the margin call fees for investing in the commodities market are so high – and the higher futures go, the more margin call goes up. He noted, in fact, these buyers may have to buy back futures contracts.

“You’ve got to stop the money from draining,” he said of those buyers.

“You don’t have to have a lot of grain to send a lot of money to Chicago (Board of Trade),” agreed Steve Vrooman of Grain Growers, LLC in Frankfort, Ind.

He added when corn was between $2-$3, one futures contract might cost $400; now it’s around $1,500. The shorter supply because of bad weather may push corn as high as $9.50 for July 2009 futures, in his opinion; Hackett guessed it could go as high as $10 if July weather is poor for the remaining crop. If July is good to corn, Hackett thinks it will top out at around $8.

Vrooman sees $6-$8 corn as being the norm for the next few years, with the soybean high end at about 2.2 times that, or up to over $17. (Last Friday, they closed at over $15 for November, in Chicago.)

Both analysts said high prices will ration corn sales and usage, though Hackett added a change in federal government policy on ethanol is needed.

He thinks the feds may reduce tariffs on Brazilian sugar ethanol and import while the increasing volume is needed.
“Corn-based ethanol plants are shutting down because they can’t make money anymore,” he said, adding that ethanol has gone from $2.30 to $2.85 per gallon lately. “I don’t believe the government would like to see gas prices go through the roof, either.”

Brazil, he said, has more sugar ethanol “than it knows what to do with,” and that buying it now does not commit us to doing so beyond the time we need the supplemental fuel.