Biofuels and Bad Weather

America’s Food-to-Fuel Gamble

June 16, 2008

Biofuels and Bad Weather: What Will The Weather Bring This Summer?

Mr. Dutcher warns that the delay in corn planting and crop emergence will push the remaining crop into a critically hot period in the summer and may interfere with the development of the kernel during its most important pollination stage. There is a 10 to 14 day window in the middle to the end of July when corn silks develop. Silks are the hollow tubes on corn cobs that capture pollen in order to germinate the kernel. If it's too hot or too dry, the development of the kernel is altered. On the press call, Mr. Dutcher warned,

“Given last year’s season’s temperatures and this year’s delays, we may be at tasseling stage around the 18th of July and the silking stage at the 25th of July. Statistically, the hottest one week of the year falls within this 7 day period. If temperatures in June remain cooler than normal, this will push maturity farther and we may be able to get through the pollination period. (However), the corn will still be trying to mature before fall freeze. And if last year’s fall temperatures replicate this year, there may be an early freeze this year. So it will take nearly perfect weather this point forward to recover.”

According to Gary Drimmer27, agricultural economist, the prognosis for 2008 is quite bleak if history is any guide.

“La Niña years are highly correlated (70 percent) with below trend line yields in US corn production…It’s been 19 years since the last major drought in the corn belt – which happens to be the historical average between droughts.”

Fortunately, the chances of a major drought have diminished, according to estimates by Climatologist Elwynn Taylor. Taylor has lowered the probability of drought this summer from 33 percent (as of May 2nd) to 23 percent (as of June 13th).28 That is, there is a one in four chance – that a major drought could occur this summer. However, even if the Corn Belt avoids a major drought, delayed planting and crop emergence pushes the critical pollination period of corn crop into the hottest months of the year. Given that the nation relies on the top two corn-producing states, Iowa and Illinois, for over a third of the nation’s corn (36 percent), Al Dutcher warns:

“The whole corn crop boils down to what Iowa and Illinois will do since much of the corn crop in these two states is not irrigated. If you have any problem with those two states, the market will explode…It’s going to take extraordinary circumstances to get through this year without major interruptions in corn production… We’ve got a mess on our hands.29

In other words, since 5 billion bushels of corn30 produced in Iowa and Illinois are not irrigated, nearly 40 percent of the corn crop is dependent on good weather. Since the Renewable Fuels Standard mandates that 9 billion gallons of corn ethanol be blended into US gasoline this year, the gasoline, corn and food markets are closely linked. Any major weather disturbance this year could have a serious impact on corn, food, and gasoline prices. A Wells Fargo & Co. vice president and agricultural economist went so far as to say,

“You might see a point where even the threat of a drought could cause gas prices to rise.31

Darrin Newsome, an agricultural economist from DTN, a farm news organization observed,

“We could see a spike that would raise prices so much in so many places that it could tip the U.S. into a recession.32