Stage 1 Of The Dollar's Collapse: Food/Gold Shortages Reach Breaking Point

The world is currently nearing the end of this phase.

The global financial system is facing a critical shortage of both gold and food, which will soon be revealed to the world triggering the next stage of the dollar's collapse and the start of true financial crisis. It doesn't matter which comes first: awareness of the critical shortage of physical gold backing outstanding claims of ownership will lead to awareness of critical shortfall of food needed to make it through 2010, and visa versa.

Gold market nearing collapse

I have already written a lengthy article explaining that the gold market reaching the breaking point.

The gold market is an accident waiting to happen

Basically, the gold market operates on a fractional reserve basis. On average there are several claims of ownership on each gold bar conforming to London Good Delivery (LGD) standard on the "pool" of gold which acts as liquidity for the massive OTC gold trade based in London. Similarly, there are several claims of ownership on the gold bars in Comex warehouses. If a sufficient number of market participants become concerned about this (which is happening) and there is a stampede to take delivery of physical bullion, the entire gold market will come crashing down, taking most of the global financial system with it. Market failure isn't a risk, it is a certainty. The unregulated gold market is an accident waiting to happen.

While the gold market is nearing collapse, it is difficult to tell exactly when it will do so because of the complete lack of transparency. However, with gold prices having solidly broken through $1000 barrier and heading higher ($1164 as of this writing), a breakdown seems imminent.

Looming 2009/10 global food shortage

Going into 2010, the world is missing a couple of month’s worth of food, which means the world will experience a completely predictable food crisis. The principle reasons for this shortfall are increased demand from China, a lack of emergency stockpiles, and a catastrophic fall in global food production. However, before exploring these factors, it is critical to understand that the U.S. Department of Agriculture is actively working to hide the 2010 food shortfall.

USDA misleading the world

The U.S. Department of Agriculture is misleading the world about the true state of food inventories and food production. To this achieve this end, the USDA has been manipulating food production/consumption numbers and engaging in activity that can be only be described as a propaganda campaign.

Exposing the USDA's efforts to manipulate agricultural markets is child's play, thanks to developments this fall. In the last four months the USDA's 2009 estimates for US crop production have grown every month, leading to predictions of the "biggest crop ever". During that same period, back in the real world, the quality and size of the US crops has deteriorate as an already difficult harvest turned into what farmers describe as "worst harvest season ever seen".

Attacking the credibility of USDA's estimates is now pathetically easy. The distance between the USDA’s fictional production numbers and the grim reality has become too great to be rationally reconciled. It is like comparing night and day. The extent of the disconnect is captured in this crop comment from Minnesota:

[Crop Comments, November 2]

11/2 - Houston County, Minn.: Help me out here. I am confused. Just finished reading the crop comments. No harvest progress, beans to wet to combine or frosted while green. Corn molding, too wet to combine and many reports of very low test weight. Snow burying corn in Colorado and Nebraska. Flooding burying crops in Iowa, Illinois, Indiana, etc., etc. Was at the local elevator yesterday. They are in a bind because they have contracts to fill but either no beans are coming in or they have to reject them because of high moisture. Biggest crop ever coming in??? Where?

The USDA’s Biggest Crop Ever

Last week, the U.S. Agriculture Department projected the largest U.S. soy crop on record, at 3.3 billion bushels, and the second-largest corn crop at 12.9 billion bushels.

Below are the government’s numbers for US soybean production by state. The USDA is expecting record high soybean yields across the Midwest in 2009, leading to production numbers significantly higher than the 5 year average. The large increase in production between the August and November estimates indicates that the USDA doesn’t believe crops much suffered any damage during the fall harvest (particularly interesting to note are the big production increases Arkansas).

Since the United States is the leading exporter of both commodities, producing 40 percent of the global corn crop and 35 percent of all soybeans, the USDA's fictional production numbers have an enormous impact on the global supply/demand picture. By exaggerating US crop production beyond on all reason, the USDA has temporarily masked the significant shortfalls facing the market in 2010.

The USDA can’t hide the pain

While the USDA can predict all the record harvests it wants, it can’t hide the devastation being experienced by America’s farmers. The graphic below shows counties designated as agricultural disaster areas by the USDA. To qualify for a federal disaster declaration, each of the orange counties below had to show 30 percent loss compared to normal production of a particular crop (corn, soybeans, etc).

2009 has been a complete disaster for farmers. So much damage was done across the Midwest that Senators Thad Cochran and Roger Wicker introduced a bill offering disaster aid to farmers this Friday.

WASHINGTON, D.C. – U.S. Senators Thad Cochran and Roger Wicker (R-Miss.) today introduced bipartisan legislation to offer direct and timely disaster assistance to farmers throughout the nation who are experiencing significant crop losses due to excessive rainfall this fall.
…
“The extraordinary amounts of rain poured on the Mississippi Delta have caused significant crop losses throughout the region. Sweet potatoes, grain sorghum, soybeans and cotton harvests have been compromised to an extent that the financial survival of many producers is uncertain,” said Cochran, a member of the Senate Agriculture Committee. “Existing Department of Agriculture disaster aid programs cannot provide the near-term help needed by growers. The Direct Payment mechanism, which has been used to provide assistance numerous times, is the only way for the Department of Agriculture to provide timely assistance.”

“What was looking like a bumper crop for many Mississippi farmers in August has turned into enormous losses totaling nearly half a billion dollars statewide,” said Wicker, an original cosponsor of the measure. “These excessive losses have made it nearly impossible for many hardworking Mississippi farmers to pay their bills or to prepare for planting next year. The hardship caused by the excessive September and October rains will be felt beyond Mississippi’s agriculture community. This disaster will have a negative effect on our entire economy. The enormity of this problem has made it clear that additional disaster assistance is necessary.”

In Mississippi, 79 of 82 counties have been granted primary disaster designations by the USDA based on a minimum 30 percent loss for at least one crop in each county.

Agriculture economists at Mississippi State University estimate that crop losses in Mississippi are nearing $485 million with losses exceeding 30 percent of the state’s overall crop value. Based on crop reports, the MSU report noted that almost 64 percent of the state’s sweet potato crop will be lost. Nearly half of the state’s cotton, 44 percent of soybeans and 41 percent of grain sorghum will also be lost this year.

Doesn’t sound like a bumper harvest, does it? Perhaps USDA estimates might be a tad off?

In order to put rest ANY doubts about the true state of US crop production, this article will include dozens of extracts showing the full extent of the devastation experienced by farmers during 2009’s hellish harvest season.

The Reality about US crop production

Bad doesn't even begin to describe 2009. Everything that could go wrong did, as though the year was calculated to inflict maximum misery on American farmers. As one news writer put it, 2009 was “the year that is only found in a Stephen King novel" because it “has brought one nightmare after another.” The crop comment below illustrate the freight train full of problems besetting Cornbelt crops.

[crop comments, October 22]

10/22 - St. Clair County, Southwestern Illinois: Our mess in this area is about to get messier. We had one of the latest starts on record due to the abundance of moisture this spring. Almost all of the soybeans in this area were planted the last week of June and the first week of July. So far, we have had one of the ten coolest July's on record, we are on pace for the second coolest October on record, and with all of the rain predicted for the next ten days we will have the wettest October on record. Corn yields are running 170-240 bpa dry. Beans are running from 35-52 bpa which is about fifteen percent below average. Double crops did not make it along with some of the first crop beans due to frost. Can you say, "Late planting, white mold, frost, below normal temperatures, and aphids?" You are getting the picture. The fields are already wet and we are rutting some of them up daily. Bean moisture is running anywhere around 12-17% on the same cut. Corn is still in the mid twenties for most. It is taking more time to dry corn this year at 25% than ever before. Nobody seems to know why unless it is because of the big kernels. I would put harvest at 5-10% complete with some folks electing for more drying time since they do not have grain dryers. How soon will we be done? Heck of a good question. Maybe Christmas, hopefully sooner. Mother Nature has sure put a charge in this grain rally and is starting to thin the hairlines for most farmers as the worrying is growing.

Worst harvest season ever seen

If there was any consistency to the miserable 2009 harvest, it was the theme: "worst ever seen".

[Texas, July 08]

If not for the triple-digit heat, central Texas rancher Debbie Davis could almost think it was a different season entirely.

"The (pasture) grass looks like it's the dead of winter,'' said Davis, who raises beef cattle and Texas Longhorns northwest of San Antonio. The region is enduring its driest 22-month span going back to 1885. "It's horrible. It's probably the worst I've ever seen.''
…
"Everybody's pretty desperate,'' said Davis, the rancher. "We're all hoping for a hurricane.''

[Wisconsin, July 26]

"This is just absolute devastation for our agricultural economy," said Sheriff Scott Pedley.

In 20 years as sheriff, Pedley said he has never seen crop damage as severe as what occurred.

So much hail fell, "one of our townships had to get a plow out to clear roadways," Pedley said.

[Iowa, August 4]

When hail decimated crops near Lawler and Waucoma in June, it was the worst Iowa State University Extension field agronomist Brian Lang had ever seen.

Until July 24.

"I've never really seen bad hailed corn at tassel state and I've never seen it this bad, this widespread," Lang said. "There were 400,000 acres damaged with 10 percent totally destroyed. Even for the crop that didn't get hurt too much, this came at the worst possible time, tasseling."

…
"I've never seen a hail storm this big," said Julie Vulk, Farm Service Agency executive director in Winneshiek County and interim director in Fayette County. "It's just hard to wrap your brain around it."

Vulk estimated that 50 percent of farmers don't have insurance.

[South Dakota, September 2]

Butte County, which borders Wyoming just north of the Black Hills, is an area that's been hit hard, said Steve Smeenk, a farmer and rancher who is a member of the county commission.

"Grasshoppers are just about as bad as most people around here have ever seen them," said Smeenk, 61. "There's tremendous numbers. The ground moves when you walk."

"All of a sudden, they just exploded," Smeenk said. "I've killed millions and millions of them, but I haven't killed enough to make a dent. There's billions and billions of them out there." [In October, the USDA declared 10 South Dakota counties to be disasters due to grasshopper infestations]

Mississippi, September 22]

“They are deteriorating in the field by the hour,” Glenn Mast, a Brooksville farmer, reported of his corn, soybean and cotton crops. “Some of the crops have sprouted and are regrowing and some are just plain rotting. What percentage we don’t even know at this point; it’s too wet to go out and check.

“This is very unusual,” he added, noting he’s been farming for 40 years. “It’s always hard to say which is the worst, but this is as bad as I’ve seen it for this time of year.” [Mississippi then proceeded to have a month and a half of the record rain.]

[New Jersey, September 26]

"The rains have just killed me this year," said Tucker Gant, 51, a vegetable and fruit farmer in Elk, who estimates his total losses this year at nearly $220,000.
…
"Nobody has ever seen rain as drastic as this year, even talking to old-time farmers," said Grasso, a third-generation farmer who estimates losses so far at roughly $50,000.
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"It's never been that bad as far as I can remember," said Gant, pointing to water pooling in a field as he drove his pickup truck along a bumpy dirt trail toward 35 acres of barley overrun by tall weeds. "I have never seen water lay there more than two days. It should have been harvested, but you can't harvest weeds taller than barley."

[Crop Comments, October 27]

10/27 - Scotts Bluff County, Nebraska Panhandle: Following ten years of drought farmers trying to scratch out a living in the Nebraska panhandle were in seventh heaven when showers arrived on schedule this past spring; fast forward to October and sentiments couldn’t be worse. The rains we’d spent years praying for turned vicious....pounding fields so hard sprouting beans couldn’t break the surface, and delaying corn planting by soggy-weeks...not days. In addition to less-than-desirable planting conditions our summer was unusually cool and cloudy; harvest troubles were inevitable. As of October 26 eight percent of the dry edible beans remain un-harvested, farmers are slowly mudding-out the sugar beets, and corn is still running mid to upper twenties moisture. With area bins equipped with fans, not dryers, we’ve no recourse but to wait and pray.

In the past few weeks we’ve seen record snowfall, and rain measuring in inches...not the tenths our area is known for; the latest weather forecast says we have a 90% chance of 5 to 15 inches of snow accompanied by 55mph winds later this week. It looks as if this might be the year of ‘The Harvest’....the one retired farmers talk about when they’re old and grey.

”I remember 2009; you never saw anything like it......”

[Iowa, November 3]

Darwin Luedtke, a grain merchandiser for the North Central Cooperative office in Woden, said this harvest has been a major battle for farmers.

“I haven't seen anything like this in 37 years,” Luedtke said. “The fields are wet, beans and corn aren't as mature as they should be because of the cooler weather this summer, and it's going to cost farmers money to dry the crop. It's been a very difficult harvest.”

[Crop Comments, November 4]

11/4 - Franklin Country, North-Central Iowa: Corn at 28%, we have maybe 10% harvested in this area. The last load of beans I took in was 14.2%, we have around 33% harvested around here. Yields for beans going low-50's to low-60's. Corn yields- only God knows. I would say we will be down around 25 bu from 2004 record yields; probably 190-195 will catch it this year. Certainly no record yield in my part of Iowa as the USDA is saying. Quality will be a big issue this year; I see a lot of corn getting dumped, rather than stored. The old-timers are saying they have not seen a harvest like this for many years and I hope we never see another one like this one for 30 years.

[Illinois, November 12]

"I've been doing this for 30 years and I've never seen a year like this," said Ron Waldschmidt, a vice president with farm equipment dealer A.C. McCartney in Wataga, Illinois.

"It's not unusual in any given year to have wet conditions, or maybe a variety that tends to mold, or maybe the moisture is a little bit high. But this year, you've got it all," he said.

[Arkansas, November 12]

On Nov. 4, Gus Wilson took a sample of soybeans with 100 percent damage.

“It was the first time I’ve seen that,” says the Chicot County, Ark., Extension staff chair. “The situation here is bad, bleak. We’ll be lucky to make half the crop we’ve made in the last three to four years. That’s strictly due to the weather.”

Chicot County in extreme southeast Arkansas has caught huge rains all fall. Now, watching crops deteriorate, Wilson says he’s not seen “a group of growers who’ve been more discouraged. Those who were planning to plant wheat may be out of luck. If there’s wheat planted and emerged in Chicot County, I don’t know where it’s at.”
…
Faced with a seemingly unceasing deluge in 2009, veteran farmers are struggling to come up with a similar year in the past.

“My father is 82 years old and he’s farmed 55 to 60 years,” says Wilson. “He says this is the worst harvest season he’s ever seen. Out of his career, he said only one year comes close — he can’t remember if it was in the late 1950s or early 1960s.

Abnormal weather

Mother Nature did not cooperating with farmers this year. In fact, the abnormal weather has seemed almost calculated to maximize damage to crops.

Ernie Flint, a Mississippi Agronomist, noted as much, suggesting 2009 is a great year for seeing “natural selection” in action.

[Mississippi, October 12]

The idea of “natural selection” may sound odd to some who have heard it used in other subject areas; but this year we may see some fields tolerate the stresses of unusual weather while others will be severely damaged. There will likely be a gradation among crop varieties, showing a wide range in their levels of stress tolerance.

It’s difficult to accept the idea that some good may come from all this trouble; but we will at least have a chance to see which varieties are most stable under conditions of alternating drought, high temperature, high humidity, diseases, insects, and excessive rainfall. Those varieties (if any) that survive this gauntlet will almost certainly be chosen by seed companies for production in the coming years and by farmers for planting.

Below are some of the problems that plagued growers in 2009.

1) Excessive rainfall

2009 was a wet miserable year. The spring was plagued by yield-hampering excessive rains throughout the Midwest. Fertilizer they applied simply washed away in the rain.

The summer rains also devastated Maine.

[Iowa, June 29]

"I'd say this year is one of the most unusual years we've had in the last 20 years," said Don Fry, executive director of the Des Moines County USDA Farm Services Agency. "Because it seems like it rains every second or third day, the ground is constantly kept wet. We've heard a lot of reports from people with wet spots turning up in fields that they and their parents ... don't ever remember being a wet spot."

The combination of constant rain and cool temperatures this spring kept farm fields saturated, making planting difficult and hampering crop growth. Also, frequent rains have rinsed a portion of nitrogen fertilizers from fields and hindered the application of herbicides, all of which cuts into yields, Kester said.

"This spring has just been a terrible struggle," Kester said. "Anybody that mowed hay within the last three weeks probably lost their hay crop because it got wet."

[Texas, September 23]

Bruce Wetzel has been a farmer in Sherman all his life, learning from his father back in the 1960's.

He's seen all the ups and downs of producing wheat and corn in Texoma, and he says this was one of the worst years for corn.
…
"All the rain we got back in April and May, we got 20 inches of rain in a two week period there, really just damaged our corn. Our corn just never quite recovered from too much water,” said Wetzel.

Wetzel says he lost about 50% of his wheat and corn crops this harvest season, a trend that farmers are experiencing across Texoma.

[Maine, July 25]

Hay and corn are critical components of livestock feed, Bickford said. "This stunted corn and alfalfa is forcing farmers to purchase grain and feeds. That is a very bad situation. Prices are extremely high because of the Midwest floods earlier this year. Maine's farmers couldn't come up with a worse situation in their worst dreams."

On Thursday, a 75-year-old former dairy farmer visited the Wright Place in Clinton. He recalled delivering glass bottles of milk and told Brian Wright that he never remembered a rainier summer.

"This is unreal," Wright said. He cut back from 700 acres of feed corn to 600 acres to trim his budget this year, and now he may not get to harvest much of that.

Relentless rainfall during the Fall

A very wet September and October dropped almost statistically impossible quantities of rain across the Midwest. The heavy and continuing rains not only hampered the harvest, but also led to extreme reductions in quality and yield. The September-October Rainfall chart below should drive home how extreme rains were.

Here is a chart showing US soybean production by country for comparison.

[Louisiana, October 8]

Three weeks of heavy rains are threatening northeastern Louisiana's soybean, sweet potato and cotton crops, some of which have already shown significant deterioration in the fields.

"It's killing us," said Ouachita Parish producer Gary Mathes. "We cut some beans a week ago that we had to sell at a salvage price of $3 a bushel."

Soybean prices have been hovering near $9 a bushel.

"We fought a short corn crop, but we had one heck of a bean crop and the rain is taking it away from us," Mathes said.

Venoy Kinnaird said his farm has been drenched by about 20 inches of rain since Sept. 12.

"I've got some beans that I won't cut; they're not salvageable," Kinnaird said. "And I've got some sweet potatoes that are halfway out of the ground. Cotton has taken a terrible hit, too, even though we don't have that much planted around here this year.

"We're absolutely waterlogged. What's really bad is we're coming off of a disaster last fall."

[Crop Comments, October 13]

10/13 - Buena Vista County, Northwest Iowa: Harvest at stand still after this snow, more moisture forecasted for most of week, beans yields in the 50's so far, about normal, corn has not been near as good as earlier thought to be by ear counts, still very wet 25% or more with 50 # test weights, I think the speculators are in for a big surprise by the time harvest ever gets on the way or done.

-- Buena Vista County, Northwest Iowa

10/13 - Northern Indiana: We have not been able to even get into a field to harvest and weather has only let us plant 20 acres of wheat, the corn is running 28% and bean stems are still green. I think they should rethink the harvest out looks, can't see it being a bumper any thing...with a chance of early snow.

10/13 - Southeast Nebraska: After a fast flurry of activity until drying facilities were filled for corn and quite a few soybeans harvested but now rain and cloudy so quite a few rigs are idle. Yields vary but ours are not as good as last year by about 10% due to late planting and cool summer. Most corn moisture until last rain in upper teens and 20s and beans harvested on a few dry days and dry then are running at 15% and above.

10/13 - Brown County, S.D.: Haven't turned a wheel yet for harvest. Approaching 13 in. of rain for Sept. and early Oct. and now it is snowing. Gonna be an interesting harvest if we even are able to get in the field. Good times are gonna be had by all here.

10/13 - North Central Iowa: Combined beans last night until started snowing. Yesterday was first day of beans for almost two weeks. Most have only started with less than 20% of the beans harvested here. Some fields yielded OK but the bad fields with lots of SDS and mold are really pulling our average down. Corn is wet, and I've heard light weight 29% and 50-51#, some stalk rot. Virtually no corn harvested here.

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10/14 - Sedgwick County (west of Wichita), South Central Kansas: We are now concerned about getting our wheat planted. Looks like only 15% has been planted in Sedgwick and Sumner counties. It has been very wet for the last week and there was significant rain yesterday. We don't have any irrigation, all dry land cropping. Dry land corn was picked a couple of weeks ago and was disappointing at only 75 bu/ac. It looked much better all summer. Looks like a large milo crop in our area! My early planted fields were good even with a weed problem (due to manure) and later plantings look better. Those neighbors that planted milo late (which is not unusual in our area), the crop will not reach maturity prior to a likely freeze. Double crop milo is also behind.

10/14 - Coles County, East Central Illinois: Raining again. Cut beans between rains with moisture in the 14.5 to 15.5 % range. Yields have been disappointing on the RR2 beans. My Trisler RR1 3463 out yielded them by 6 bu. so far and my Pioneer Y beans out yielded them by 4 bu. My Pioneer 93m61 RR1 beans had White mold. Picked some April planted corn with moisture still in the mid 20s and some in the upper 20s.

10/14 - North Central Texas: Over 2 feet of rain the last month. Most cotton will never be harvested.

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10/15 - Bartholomew County, Columbus, Ind.: Bean yields are very disappointing. My good low black ground where I usually yield the best crops are my worst yielding. The hilly ground where the excess water ran off is my best. Average around 45 bu. weighed over scales. Another breakeven year, hopefully. Another 1/2 inch of rain on an already too wet ground. With temps in the 40's it's going to take forever to dry enough to get back in the fields. May God bless you all in a very frustrating and trying harvest 09!!!

10/15 - Southern Iowa: Just keeps on raining and raining. We have not been able to even put a wheel of the combine in the fields yet. Some guys with mud hogs are out making ruts...but the rest of us just watch and shake our heads. I suppose folks are going to get jumpy and start burying combines here soon.

10/15 - Faribault County, Minn.: The weather here just plain stinks. Rain and snow every day this week so far, with more on the way. Sunday and Monday are supposed to be sunny, and the next system moves in Monday night. Those that tried corn say it is very wet and light. It is looking less likely we will get everything done before winter sets in.

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10/16 - Southeast Hanson County, S.D.: Combined 64 acres beans first day then 2.5 inches of rain. Several fields are still too green and we had a killing frost 3 days ago which may have damaged some beans. Corn is mature but too wet to dry or bin. More rain forecasted for Tuesday. Fields are too wet which will bog down combines. Beans make 50 B acre, Corn don't know yet as have not been in corn fields yet.

10/16 - Stutsman County, Central Southeast North Dakota: Nobody is getting anything done here! We have had rain earlier and now we have 6 to 8 inches of snow on the ground (Oct. 15). We never finished chopping corn yet, about 3 days to go. Not very many Soybeans have been harvested yet either. Never ever had to chop corn in the snow before.

10/16 - Ellendale, N.D.: 5 to 6” of snow in Enderlin. Some power outages, some vehicles in the ditch, some buried soybeans.

-- Ellendale, N.D.

[Mississippi, October 16]

Unseasonably heavy rain is forcing farmers to leave their crops in the fields to rot, costing them an estimated $377 million.

The soggy weather conditions, which have kept tractors out of the fields, eventually could force some farmers out of business.

Only a small percentage of the 3.6 million acres of row crops - cotton, soybeans, sweet potatoes, corn and rice - was harvested before rain soaked and flooded fields throughout the state.

"I'd say 90 percent of farmers are not done with harvest," said Leland farmer Kenny Fratesi, who planted about 4,000 acres of soybeans.

"Don't many want to talk about it (the crops)," he said. "It's too depressing."

[Northern Kansas, October 16]

Harvest so far has been about as awful as the new Bob Dylan Christmas album.

Typically USDA's November yield forecasts increase, but this is not a typical year, as freezing weather has dinged yields and caused major crop quality problems.

A colleague of mine sent me some snapshots of an Iowa farm that had seven inches of snow last Saturday. Northern Kansas had over 10 inches of snow.

.

[Louisiana, October 17]

Northeastern Louisiana farmers finally saw the sun Friday afternoon, but it might be too late to save the bulk of the soybean, cotton and sweet potato crops.

"It's pitiful," said Caldwell Parish producer Drew Keahey. "I think it's going to be worse than last year."

And that's saying something, considering Hurricane Gustav caused more than $1 billion in Louisiana agriculture losses last fall.

But some parishes, like Morehouse, have received more than 30 inches of rain since Sept. 12, literally drowning crops that were mature and ready for harvest when the rain began.
…
Soybeans may have suffered the most, producers said.

"There will be a lot of beans that never come out of the field," Keahey said.

[Mississippi, October 21]

Corn will suffer from quality issues. Soybeans will have significant quality and yield losses if harvested. Rice will suffer quality and yield losses with much of the crop is on the ground. Cotton crop will suffer yield and quality losses and cottonseed will have essentially no value.
…
Bolstering this is a fact-sheet released the week of Oct. 12 by Delta Council. The release says, “Large areas of the Mississippi Delta have received 15 to 20 inches of rain over the last 30 days with many areas receiving 25 to 40 inches of rainfall over the past 60 days since Aug. 15. In places this is anywhere from 400 to over 600 percent of normal.”

The Delta Council release also quotes Steve Martin, interim head of the Delta Research and Extension Center (DREC) in Stoneville, Miss.: “Crop conditions are rapidly deteriorating. The USDA weather service at Stoneville reports that October has seen the second highest level of rainfall ever recorded (record was set in 1941). Several previous research efforts have documented the days suitable for field work in the area.

[Crop Comments, October 26]

10/26 - East Central North Dakota: Total stand still in East Central North Dakota. Too wet to dig beets, too wet to combine soys, 1/2 or more of the dry beans left and too wet. Sunflower moisture went from 17 two weeks ago to 27 yesterday. And weather man says snow for Thursday, Saturday and Sunday of next week...Man are we in trouble...

10/26 - Cedar County, Neb.: Sunshine is getting to be an abnormal object in the sky. We received 2" of rain Tuesday thru Friday and raining this mourning. Harvest is slow, we have two soybean fields out over the scale 69bu.irrigated and 50 on dryland well above average. Corn harvest looks to be great but very wet irr.250 dryland 200. Praying for sun and warm weather. Be careful; safety first!!!!

10/26 - Floyd County, Iowa: We had 4 inches of rain Oct.20 thru Oct.24. Most are 60% to 70% done with beans, of which most were harvested too wet. Corn will vary from 21% to 38% in one pass across the field, rather unusual for 100 day corn planted before April 24th. Yields good, reports of dried corn test weight 48 to 53 lbs. Corn harvesting is practically non existent.
…
10/26 - Bond County, South Central Illinois: Is this really possible? We have had the wettest couple of months in history. Most corn is still 30% and they are calling for 2-3 more inches of rain this week. We are losing crop as we speak. Lodging in the corn is starting to take place. Any suggestions? I am ready to punt!!!!

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10/28 - Far Northern Illinois: Many fields of soybeans untouched some corn being picked but hard to find corn under 30%. Mold is present on almost every ear I looked at yesterday. Stalk quality is starting to slip quickly in some fields. There simply is not enough drying capacity to harvest this crop with any speed. Most guys have drying capacity for a half day of harvesting and two big 12 row combines can bury the local elevator at 32% corn. Feels like a real disaster is just around the corner with any type of wind or snow event. We will be talking about the fall of 2009 for many years to come.

10/28 - Lancaster, Pa.: We are wet and getting wetter. Harvest is at a standstill with 3 inches of rain in the past week. Corn moisture still running in the upper 20's. Quality will soon become an issue as well. It will be a challenge to get the remaining acres of small grain planted.

10/28 - Ramsey County, Northeast North Dakota: Rain again with more rain & snow in the forecast for the next few days. We have only harvested 3 partial days in the past month. Pinto beans are less than 25% harvested, moisture has been over twenty on most, what is left will only be a salvage operation. Soybeans are less than 10% harvested, and they were upper teens to over twenty moisture. We had not planned to even try the corn until after Thanksgiving, may harvest it in the spring, did a lot last year and was pleasantly surprised by the increase in test weight and minimal loss.

10/29 - Clark County, Ark.: If there were any doubts about how nasty it is down here this ought to answer those questions.

-- Clark County, Ark.

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10/30 - Lafayette County Wis.: WET, WET, WET. I guess we are all in the same boat. We are way, way behind. Corn is developing green mold. Broker says when weather straightens out there is a big crop out there. Problem is will the sun ever shine again? Stay safe everyone…a safe harvest is a good harvest.

10/30 - Nebraska Panhandle: Guess we don't have to worry about the irrigated corn blowing over before harvest, the snow is holding it up!

-- Nebraska Panhandle

10/30 - Buena Vista County, Northwest Iowa: Raining here again, close to 10 inches now in October, Still some beans out in the fields here, I just got done, Yields decent in the 50's which is normal. Some have gave up on beans and started corn, most of it from what I've heard is anywhere from 20% to 40% moisture and yields from 120 to 220, with very low test weights. Stalk Rot now a real concern & some guys are finding green snap they didn't know they had, those yields cut in half. I believe this harvest, when it's over, if ever will be one, we all will want to forget!

10/30 - Bond County, South Central Illinois: UN-FREAKIN-BELIEVABLE.

[Louisiana, November 5]

Stephen Logan was weighing whether to tear up his water-logged fields to get at a cotton crop speckled in places with mold, mildew and stains. He said he got 28.1 inches of rain on his northwest Louisiana farm last month, more than he said he's seen in some entire years, and the shorter days have meant less sunlight to dry things out.

"This was shaping up to be one of the best cotton crops we ever had, but it's absolutely rotted away on the stalk," Logan said. "It's very frustrating and humbling, to say the least."

[Alabama, November 10]

What had started as a good season for cotton could be a complete loss for some farmers if heavy rains hit fields before harvest, said Richard Petcher, agent with the Alabama Cooperative Extension Service.

"It's been a 30 percent loss so far in southwest Alabama, and more rain could make it 40 to 50 percent," Petcher said Monday. "Some fields are already a 100 percent loss."

Financial damage from Ida could be in the millions of dollars for Alabama farmers, he said. Rains have delayed harvests by about three weeks affecting not only cotton but also leaving some peanut crops vulnerable to early frosts.

"The majority of the cotton crop is still in the fields," he said. "Peanuts are about 60 percent harvested. There's been concern about rain, but now it's almost panic."

Soybeans have also been hurt by rain, with crops rotting and sprouting in the fields, Petcher said.

[Virginia, November 17]

Last week's torrential rainfalls have caused damage and delays to some Virginia farm crops, but the extent of losses is unknown, some agriculture experts said yesterday.

Several crops that were recently planted or still in the fields were hurt by the widespread, three-day deluge, including winter wheat, barley and soybeans, said Molly Payne Pugh, executive director of the Virginia Grain Producers Association.

"There is definitely going to be damage," Pugh said. "I don't have a good feel for how much yet. Right now, we are assessing."

2) Flooding

The natural consequence of excess rain is flooding, which experienced across the Midwest. It is easy to see why flooding was such a problem this season when looking at the amount of precipitation recorded during October 2009, the wettest on record.

You can't harvest flooded fields.

[Missouri, Illinois, November 2]

The autumn monsoons are hard to figure, said Benjamin Sittrell, a meteorologist for the National Weather Service office in suburban St. Louis.

"Typically during the late-year period, it's our driest portion of the year," Sittrell said. "To see such astronomically high amounts of precipitation, where we got several inches above the previous record levels, is very abnormal.

Sittrell said thousands of acres of farmland are under water, particularly in the flat areas of southern and western Illinois, where the Illinois, Ohio and Kaskaskia rivers are among several that are flooding.

[Crop Comments, November 3]

11/3 - St. Clair County, Southwestern Illinois: We picked up a mere 14 inches of rain in October. Not only was this the wettest October on record, it was the fourth wettest month ever recorded in our area. Saturday brought about panic for guys farming in the bottoms along the rivers. Many were doing anything possible to get their crops out before any of the rivers crested. It is slow going for everyone as you cannot bring any trucks, wagons, or grain carts into any fields for fear of burying them. The neighbor down the road buried his combine and it took two Caterpillars to get him out. I would put corn harvest at maybe 8 percent complete as some folks have never started due to high moisture and no on the farm drying. Beans are maybe 30 percent complete. I guess we will see how much the beans rotted in the next few days. We are hoping for beans to go on Wednesday or Thursday in this area. It was 70 degrees today and we could use another six weeks of this weather. Many nervous folks around here and who can blame them. Corn yields are running anywhere from 170-240 and beans are running 35-54. Be safe everyone and best of luck with your harvest.

[Arkansas, November 4]
…
And further downstream in near Des Arc, the crest is not expected until Saturday or Sunday. Farmers there are paying the big price. Five-hundred acres of Doyle Burnett's soybeans are already underwater.

THV's Mike Duncan asked Burnett, "What are you going to do with that? Just let it go I guess", Burnett replied. "It will be gone. I don't see any chance of the river coming back down anytime soon. So I think they're totally gone."

River and stream flooding completely ruined many soybean and corn fields.

3) Disease outbreaks

With all wet weather plaguing farmers we have had in much of the state this summer, disease outbreaks were bound to happen. The disease pressure has been extremely varied. Soybean rust Brown stem rot, root rot, Sudden Death Syndrome (SDS), and white mold have been the most commonly seen on soybeans.

The soybean rust map up like a Christmas tree over the month of October. So far in 2009, soybean rust has been found in 16 states and over 546 counties in the United States (soybean rust was found in only 392 counties in 2008).

[Wyoming, September 10]

The Big Horn Basin dry bean harvest is beginning, but cool, rainy weather and diseases have taken tolls on yield.

Mike Moore, manager of the University of Wyoming Seed Certification Service, said his agency is just starting windrow inspections, and some fields are not doing well.

“It’s sort of tough out there right now,” he said. The only area that seems less affected by disease is the far southern end of the Big Horn Basin, Moore said. His inspectors have found blight and mold around Powell, Byron, Emblem and Burlington.

“It doesn’t look like location is going to allow you to escape it,” he said.

Fungicides are available to prevent white mold but few growers apply them, Moore said. The fungicides won’t treat white mold after it appears. It thrives in fields where humidity is high and recent heavy dews have kept those levels up.
…
“Bacterial bean blight has people anxious,” Moore said. “We’re hoping it’s not widespread, but it’s pointing that direction.”

4) Insect infestations

A wide array of insects attacked crops in 2009. Grasshoppers, soybean aphids, bean leaf beetles, grape colapsis, and Japanese beetles are just a few of the pest which could be found in soybeans fields.

Worst grasshopper infestation in 20 years

At ten southwestern South Dakota counties were declared disaster declarations in big part due to damage caused by hordes of grasshoppers which devoured crops, hay fields, grass, and other livestock forage. In far southwest South Dakota, there are more than 60 grasshoppers per square yard

Nebraska, South Dakota, Wyoming, Montana and Idaho had the worst infestations of grasshoppers this year, but large populations were also found in North Dakota, Kansas, Oklahoma, Texas, Colorado, Utah, Washington, Oregon, California and Arizona.

[South Dakota, August 21]

Mark Tubbs, who ranches in southwest South Dakota and inside the Wyoming border, plans to sell about a third of his cows this fall after putting up a sixth of the hay he usually does. He had been expecting a decent cutting — until the grasshoppers started chomping.

"This year we had a good start but they just took it," said Tubbs, 57. "The grasshoppers have taken it down to the dirt. They've eaten everything but the cactus."

[Wyoming, August 21]

That's little comfort to David Kane, a rancher near Sheridan, Wyo., who said the grasshoppers on his ranch are the worst they've been in more than 20 years. Kane already sold off part of his herd because the pests ate his cows' food.

"They're devastating," Kane said. "They were so bad here on the ranch that we sprayed our meadows because the second-cutting of alfalfa wouldn't green up because they were eating it as fast as it was trying to grow."
…
"We've had one good year in the last 10 years, and that was in 2005," he said. "That's the problem we're having with the grasshoppers. It's just taking the will and the heart out of us."

Worst still, Grasshopper infestations grow exponentially worse every year until some weather event breaks the cycle. If all the eggs being laid by 2009 grasshoppers survive the winter unharmed, some areas will experience a grasshopper infestation of biblical proportion next year.

5) Persistent cool temperatures

Cooler than normal temperatures slowed crop development this growing season. Solar radiation levels in 2009 fell to record and near record lows, dropping roughly 10 percent across most of the Corn Belt and Upper Midwest relative to 2008. A wet, cold spring was followed by a dry, cold summer in most of the Midwest. It was the coldest July on record across Midwest.

[Maine, July 25]

This has been a bad year for dairy farmers: Milk prices have plummeted and rain has prevented them from getting onto their fields to harvest hay. Fertilizer they applied simply washed away in the rain.

The longer hay grows without a cutting, the poorer the nutritional quality and the more money farmers will spend this winter to supplement it. Cornfields are rotting without enough sun or heat to ripen the plants.

"The season is lost," Julie Marie Bickford of the Maine Dairy Industry Association said Friday. "With milk prices so low and this feed disaster on top of it, farmers are like deer in the headlights."

6) Hail

Abnormally widespread and powerful hail storms were seen across the Midwest this year, especially in Iowa. Look at the picture below of the Pine Lake Country Club in Eldora, Iowa. That is the type of damage caused by baseball size hail driven by 100 mph gust. Imagine what this type of widespread hail did to crops across Iowa.

[Iowa, August 9]

On Aug 9th, Pine Lake Country Club in Eldora, Iowa was hit by a hail and wind storm. 12-14 minutes of sustained 2"-3+" hail driven by straight line winds with gusts over 100 mph.

Damage to club house.

[Wisconsin, July 28]

For Kevin Leahy, it’s a total loss. He doubts any of his 600 acres — of what used to resemble corn — north of Shullsburg will be harvested.
…
Kamps was at home during the storm and knew his crops would be in trouble when the oak leaves around his house started falling to the ground. The wind blew a drift of hail more than 2 feet high in front of his patio door, he said.

“It was like a big sand blaster,” Kamps said. “I’ve seen damage before but not near so widespread and so major. This took everything we had.”

[Nebraska, July 2009]

Lethal heat, hailstones as big as baseballs, rain seemingly without end and tornadoes, some reported to be a quarter- to a half-mile wide. After a relatively placid May, Nebraska's weather went from meek to mad in June.

“I don't know where that switch in the sky is, but it turned on,” said Ken Dewey, an applied climatologist with the University of Nebraska-Lincoln.
…
“It rained somewhere in Nebraska every day of the month,” Dutcher said. For 25 of those days, some part of the state got more than an inch of rain; for seven of those days, some part received more than 3 inches.

The Panhandle received so much rain, damage reports could end up showing that 1,000 miles of roadway were washed out, according to the Nebraska Emergency Management Agency.

Widespread hail was reported across the state, with one rancher telling the National Weather Service that he found dead animals along the road. In the far western Panhandle, it hailed so much that the roads had to be plowed, as hail reached 6 to 8 inches deep.

…
According to the federal Farm Service Agency, some 750,000 acres of crops were damaged and a small percentage destroyed.

[Iowa, August 4]

Corn was snapped to foot tall stumps in some areas. No-till beans had more corn residue from last year's crop than beans left in the field. Golden oats was smashed to the ground, and hay fields had nothing left. Hail as big as baseballs pummeled property.

"This was the mother of all hail storms," said Dan Burkhart, Fayette County Extension education director.

In 38 years on the job, he's never seen anything like it.
…
"Eighty-five percent of the crops in our county have been hurt by hail this year," Burkhart said. "Of that, 33,000 acres were completely destroyed."

7) Early snow

Early snow dealt a heavy blow to the soybean/corn harvest across the northern Midwest. The impact of having “acres and acres of soybeans covered in white” is pretty self explanatory.

[North Dakota, October 5]

North Dakota`s wet spring and summer is being followed by a wet and snowy fall.

Two snowstorms have already turned the ground in much of the state white, and while the early snows will melt before winter sets in, many farmers may not get row crops harvested before the seasons change again, unless Mother Nature provides them with some dry weather.

In North Dakota, it`s common to see autumn snow coat the state`s sunflower and corn crops, but acres and acres of soybeans covered in white is an unusual sight. October snowstorms have stopped many of the state`s combines right in their tracks, delaying the harvest of many late season crops.
…
Precipitation totals in some areas of North Dakota have already surpassed yearly averages, but farmers are more concerned about wet weather damaging the condition of the soybean crop than corn and sunflowers.

[Nebraska, Minnesota, October 12]

Weekend snow may have dealt a heavy blow to prospects for soybean harvest in Nebraska and other nearby states.

Weather adversity could shave as much as 200 million to 300 million bushels from expectations for a 3.25 billion bushel crop nationally, a Nebraska soybean official said Monday.

"Our part of the country got snow," said Victor Bohuslavsky of the Nebraska Soybean Board Monday. "And I talked to people in Minnesota this morning and they hadn't hardly started harvest and they were blasted with snow."

In areas of the heaviest snowfall, including around North Platte, part of the trouble is that the plant structure that holds the soybeans up in the air -- and in the normal reach of harvesting equipment -- will collapse under the snow's weight.

[Crop Comments, November 3]

11/3 - Central Nebraska: 12 in snow just melted. Fields a saturated and corm is wet with little hope of drying down because of freeze before maturity. The USDA needs to wake up and smell the roses.

[Nebraska, November 5]

SNOW SHROUDS: Corn throughout the area received a heavy blanket of the white stuff Friday morning—up to 18 inches south of Brady. Snow fell three times in October. That coupled with plentiful rain has delayed harvest as much as three weeks.

8) An Early, crop-killing freeze

The late planting and the cool summer just did not give crops enough time to grow, and so, early, an early crop-killing freeze struck the Midwest, the price is being paid. At the time, a large percent of corn was still immature and vulnerable to frost damage:

60% of North Dakota's corn
50% of Wisconsin's corn
40% of all Minnesota/Michigan fields
35% of Illinois corn
30% of Indiana/Ohio acreage
20% of the corn in South Dakota/Nebraska
10% of all cornfields in Iowa/Missouri.

[Illinois, October 12]

Unseasonably cold weather is the latest challenge to harvest for central Illinois farmers in a year one producer described as "miserable."

Frost that hit central Illinois this past weekend will have an impact on corn and soybean yields, said Patrick Kirchhofer, manager of the Peoria County Farm Bureau.

"Frost killed some soybeans that were green in northern Peoria County. There's also a lot of corn out there that hasn't fully developed," he said.

The cold weather is likely to mean yield reductions when farmers get the crop in from the fields, said Kirchhofer.

[South Dakota, October 12]

Freezing temperatures across much of South Dakota are marking the end of the 2009 growing season, leaving many farmers with crops that haven't reached full maturity because of the cool, wet summer.

Temperatures in many parts of South Dakota dropped into hard-freeze territory and stayed low for hours early Friday.
…
Yields will be down in some areas, and there probably will be some lightweight crops, according to Hall. He said he wouldn't be surprised to see more corn harvested for silage.

[Iowa, October 13]

Gary Edwards of Anamosa said about 40 percent of his corn crop was immature, and the cold snap ended its growth.

"The corn basically died," Edwards said, adding that the underweight kernels would be hard-pressed to make the 54-pounds-per-bushel requirement for No. 2 corn that brings the market price.

The result of freeze: Brittle, Flammable Corn

As a result of cool wet summer and early freeze, this year's corn is light and fluffy. This lighter density corn has been cracking into dusty pieces, starting fires in corn dryers/storage bins, and growing mold. There has been a lot of mechanical damage, and farmers who pushed temperatures and speed of dryers have seen corn "come out of the dryer as ground feed."

9) Drought

The southern portion of Texas experienced the worst drought in recorded history this summer. The chart below tells the rest of the story.

[Texas, August 14]

Texas state climatologist John Nielsen-Gammon said Friday that at least nine of the 254 counties in Texas — the nation's most drought-stricken state — are suffering through their driest conditions since modern record-keeping began in 1895.

Making matters worse are the relentless 100-degree days across the southern portion of Texas that has been under drought conditions since September 2007.

The impact has been felt most by farmers and ranchers in the nation's No. 2 agriculture-producing state. Texas officials estimate statewide crop and livestock losses from the drought at $3.6 billion.

"We've had some dry spells, but not as bad as this," said Rod Santa Ana with the Texas AgriLife Extension Service. "It hurts bad. A lot of these cotton fields didn't even come up. It's just bare ground. You'd never know cotton was even planted there."

Although the drought has eased this October rains, for 2009 the damage has been done.

Tremendous damage across the midwest

So how badly did the harvest for hell damage crops? Reports of the losses are horrendous.

[Iowa, August 4]

Iowa Secretary of Agriculture Bill Northey toured hail damaged crops in Fayette and Winneshiek counties.

"I've never seen hail damage so bad," Northey said.

With dairy prices tough, some dairy farmers thought they were diversified enough that they could go without crop insurance, Northey said. They never dreamed they'd lose all their crops.

"This is just devastating," he said. "You look into the eyes of these guys right now, and it's hard. They're at a loss. Do you keep the cows around? It's an easier decision if you know you'll have $15 milk three months from now. There's no way to make folks whole. There are just too many dollars of loss."

[Arkansas, November 4]

On Monday and Tuesday, Gus Wilson, Chicot County Extension staff chairman for the University of Arkansas Division of Agriculture, made the rounds, visiting farmers and getting a first-hand look at what record rain has left of crops in the state’s southeasternmost county.
…
“It’s bleak,” Wilson said. “It’s going to really hurt these poor Delta counties because here, agriculture is all that we’ve got.”

Earlier this season, the harvest outlook was promising.

“In September, I was pretty happy with what I was seeing in the fields,” he said. “Now we are going to be lucky to make half a crop compared to the last couple of years, all because of the weather.”

“Seven or eight weeks ago, we were looking at 1,100- to 1,200-pound cotton” lint yield per acre, Wilson said. “Now we’re 500 to 600 pounds.”

The soybeans are just as bad. Back in September, “we had a good soybean crop. The yield was there,” he said. “We have lost at least 60 percent to 80 percent due to the weather.”

“Our rice is going to be half,” Wilson said.
…
“Dryers in Chicot are rejecting beans because their quality had deteriorated so much,” Wilson said. Beans that are being taken are so deeply discounted that growers are lucky to get $3 a bushel.

Non-discounted prices on Tuesday were running between $9.89 a bushel at Des Arc, Augusta and Clarendon to a high of $10.31 at Memphis, Tenn., said Scott Stiles, Extension economist-risk management, for the U of A Division of Agriculture.

“This is the worst I’ve ever seen and I’ve been a county agent for eight years and around farming all my life,” Wilson said.

Last week, another county agent said that as a group, farmers tended to be optimistic people. “They have to be,” he said last week while 5 inches of rain fell in 24 hours in some parts of Arkansas.

Wilson agreed, but added Tuesday that “I have never seen such a discouraged bunch. It boils down to them saying, ‘I’m not going to be able to pay my bills.’”

[Arkansas, November 5]

Dollar amounts have yet to be placed on crop damages in Lafayette and Miller counties, but estimates by the University of Arkansas Extension Service indicate the losses will be tremendous, especially for soybeans.

The grain elevator companies are turning down soybeans because the damage is “too severe,” said Joe Vestal, Lafayette County Extension agent, staff chair. “We can’t put a dollar amount on the damage yet, but we’ve had lots of damage. It will be tremendous for soybeans. Most of the soybeans ready to be cut, before the rain started in September, will probably be a total loss." About 70 percent of the loads to grain elevators are damaged.

[Alabama, Georgia, north Florida, November 6]

Alabama Commissioner of Agriculture Ron Sparks is calling it a “potential crisis” — the rainy weather conditions throughout most of September and October that have frustrated growers who were eyeing pretty good cotton, peanut, soybean and corn crops.

The same holds true for producers in Georgia and north Florida, where harvest has been delayed by almost continuous rainfall, during what is usually the driest months of the year.

“Prior to September, many producers were expecting to harvest a bumper crop and were very optimistic for the upcoming harvest season,” says Sparks. “Uncommon and unfavorable precipitation during September and October have degraded various crops and caused poor harvesting conditions, which caused the harvest to be behind schedule by around four to six weeks.”

The major crops affected by the recent rainfall are cotton, soybeans, corn and peanuts, says the Commissioner. “Reports indicate that our state is in dire need of dry weather within the next two weeks, which may eliminate a potential state disaster [Area was then hit by 5+ inches of rains from Topical Storm Ida],” he said in early November. “Producers are already suffering from heavy September and October rainfall and dry conditions will not eliminate damage that has already taken place to crops across the state. Many producers are experiencing a sharp decrease in crop yield, lower grading, and crop damage from recent rainfall.”
…
“The bottom line is that Alabama producers are uncertain as to what the commodity markets will bring forth and where agriculture in our state is going,” says Sparks. “The recent weather conditions over the past two months will definitely have a negative impact on Alabama’s crop harvest.”
…
William Birdsong, agronomist at the Wiregrass Research and Extension Center in southwest Alabama, reported that wet and rainy conditions continued to delay harvest for row crops. Cotton yields and lint quality continued to suffer as a result of the wet conditions, he said. Less than 5 percent had been harvested in his area, and this could go down as the worst crop in years if the rain does not subside.

[North Florida, November 11]

Preliminary reports show that Tropical Storm Ida caused or heavily contributed to millions of dollars in losses on Escambia County’s farms.

“Agricultural losses are significant for peanuts, soybeans, hay, and cotton,” said Suzette Cooper, Farm Services Agency. The damage, she said, was not from Ida’s winds, but from four to seven inches of rain in a 12 hour period. That rain only served to further the crop losses from heavy rains in October.
…
“With all of the rain, there is some terrible looking cotton,” according to Libbie Johnson, Escambia County Extension University of Florida IFAS agent. “There is one field I know of on Highway 97 that was so pretty Saturday and Sunday. Some of it was harvested, and now the rest is basically ruined.”

[Mississippi, November 23]

On the dashboard of his truck, Allen C. Evans III, a farmer near Clarksdale, has a sheaf of receipts from the grain elevator, showing the damage levels of each load of soybeans: 39.9 percent, 67.9 percent, 51.8 percent. A born fretter, he is afraid to call, he said, to find out the final reckoning of the disastrous season.

"You're just kind of walking around like a zombie," Mr. Evans said, "saying, never could I have guessed that the best crop I've ever raised in my entire life - the one I never worried about - of all the crops to have taken away from us, how can this be the one?"

In the Delta, those elevator receipts have become talismans of the times. Michael Patterson, who helps pay for his farming with the proceeds from his grain hauling company, displayed one showing a farmer who brought in 1,110 bushels of soybeans, but got paid for 11. The rest were damaged.

That farmer was distraught, Mr. Patterson said.

“You don’t want to be the generation,” he said, “that loses the family farm.”

…

Devastating losses driving farmers out of business

It goes without saying, many will have to abandon farming after this year’s devastating losses. Making matters worst, high input costs (fertilizers, fuel, etc) made this the most expensive corn and soybean crop ever planted. I don’t know what else to say…

[Iowa, August 4]

Kathy and her husband, John, farm as McMillan Farms Inc. with John's uncle, Henry.

"Henry will be 90 this year, and he has never seen anything like this," McMillan said. "He remembers a little hail, but nothing like this. It's a complete loss of everything. It's devastating, unbelievable.

The McMillans have 1,100 acres of crops and 85 percent of it is gone. The only ground that wasn't touched was near Elgin.
…
McMillan is concerned about her neighbors. She knows dairy farmers who lost their crops and have no crop insurance.

"There are a lot of really good farmers who may not be here next year," she said. "It's breaking my heart."

[New York, Aug 14]

WEST WINFIELD - A panel of political representatives and aides sat for over three hours at a rally Friday in Mount Markham Middle School gym as over 200 upstate New York dairy farmers pleaded for action on a range of issues crippling their industry.

One after another dairy farmers and others involved in the industry took a microphone to berate county, state and federal representatives from throughout the region.

Some were brought to tears describing their inability to make a living, a few simply screamed in frustration and others demanded answers. But the dire situation facing the men and women speaking was painfully clear.

“We are in a disaster,” declared Ken Dibbell, of Chenango County.
…
“The people who feed the nation can’t feed themselves,” Gretchen Maine, a dairy farmer from Waterville, “what’s wrong this picture.”
…
The time frames for both solutions seemed in contrast from farmers need for help, with many emotionally explaining they have either already abandon businesses or are on the brink.

“I don’t think they get the message yet,” Tewksbury said, referring politicians unaware of the uncharacteristic display of emotions from prideful farmers. They don’t have until 2010. They have the next couple of months to decide if they can stay in business, he said.

[Arkansas, November 3]

"It's bad," was the way Ashley County Cooperative Extension Agent-Agriculture Kevin Norton described the status of Ashley County's crops this past week.
…
Overall, Norton said, he expects farmers to carry over a lot of debt this year. "I am afraid we will see a shakeup," he said. "It will be months before we see the full magnitude of how bad this fall has been."

[Arkansas, November 4]

“As long as the weather holds, guys will be going 24/7,” Jeremy Ross, extension soybean agronomist for the University of Arkansas Division of Agriculture, said Wednesday. “They were harvesting around my house last night ‘til around 9 p.m.”.
…
Beyond the harvest, there is anxiety about the future for some farmers.

“Some growers expect to go out of business in this region, based on the heavy damage to their soybean and cotton crops,” Ross said.

[Mississippi, November 5]

Hartwell Huddleston returned the extra combine he bought to help harvest what looked to be one of his best soybean crops ever.

After two months with little letup in rain, he figures he got five days' of work out of it, and one was spent just looking for dry ground to cut. And the quality of some of the crop he did bring in from his northwest Mississippi fields was so rough, an elevator refused truckloads.

"We've had a lot of rainy years, but this one puts those to shame," said Huddleston, who also sells crop insurance. "If a person's a farmer you start to think, 'Where am I going to sleep? How am I going to feed my children?'"

[Mississippi, November 5]

In Mississippi, farmer Andy Clark doesn't know what he'll do. He put everything this year into sweet potatoes — an expensive-to-produce crop that in a good year can yield strong returns.

This wasn't a good year. Delays in getting into the fields meant potatoes rotting in the wet soil, and even if one were lucky to harvest some, odds were good — given all the rain — they'd rot in the storage house. And it's hard to justify the labor costs for that, he said.

"It's really going to be hard to sit down and talk with the bank. There's probably not going to be any way to persuade them to give you any more money," he said. "At this point, you're probably going to have to ask them to give you a little more time to pay them back."

Of the 82 acres he'd planted in central Mississippi, he'd harvested about four. His side business, hauling potatoes, "is shot."

[Mississippi, November 8]

Ray Mosby can't remember tougher times -- and he's not talking about the newspaper business.

For 16 years, his weekly Deer Creek Pilot has chronicled the ups and downs of Mississippi's Issaquena and Sharkey counties, about 175 miles south of Memphis.

Although his 130-year-old newspaper is small, with a circulation of only 1,500, its editor has won state and national recognition for his community-minded journalism.

Lately, though, the news has been discouraging.

The last manufacturing plant in Sharkey County, the Stonecraft tile factory that employed about 70 at one time, closed up shop earlier this year. And recent heavy rains have damaged or destroyed most of the area's cash crops: Soybeans were left to rot in waterlogged fields, and ready-to-harvest cotton is deteriorating as the rains keep coming.

In a community where agriculture is the main source of capital, that spells calamity.

"I've never seen a place that needed as desperately a dose of good news as this place," says Mosby, 58.

USDA propaganda making situation worse

In the face of the misery and destitution spreading in the Midwest, the USDA is flooding the airwaves with stories filled with “bumper crop”, “record harvest”, “record yields”, and other nonsense. Through this propaganda campaign, the USDA has worked to create expectations for a bumper crop regardless of the harvest weather, and has been largely successful in its efforts. The low prices which have resulted from USDA misinformation are aggravating an already devastating situation for America’s cash strapped farmers who are being forced to sell their damaged crops at artificially low prices.

The USDA’s reason for turning on Amerian farmers isn’t exactly clear. Perhaps it is an effort to prevent panic and food hoarding. If this is the case, it has failed because a panic is now guaranteed thanks to insufficient food stocks for 2010. Another possibility is that the USDA is trying to protect the financial system (and Goldman Sach bonuses) from the losses which would result from higher food.

Whatever the case, the USDA is vile organization that, like the Fed, needs to be dismantled. The USDA’s fraudulent estimates are hurting farmers already suffering from the most miserable harvest in decades, and this is unforgivable.

[Mississippi Delta, October 16]

Farmers want to know why prices aren't reflecting hard times at harvest.

"Here in the Mississippi Delta, a large number of bean and rice acres will never be harvested due to rain and flooded fields," says Bryan Palmer. "I speak to a number of people throughout the U.S. each day and have gathered that Midwest corn and beans will be off as well."

Late planted rice in Mississippi, Louisiana, and Missouri already shows "blanks" in the rice heads. North of Highway 82, rice has started to spout in the field, says Palmer.

"A number of bankers I have talked with are saying combines will not harvest soybeans due to the damages from rain," he adds. "Soybeans have started to sprout in the fields and damage, two weeks ago, was in the 50% to 70% range.

"Why are the markets not reflecting these facts? If I can gather this information surely the big money people already know what's out here."

Disaster in the making: the 2009/10 food crisis

While realizing that the USDA estimates can’t be trusted is key, the food shortage facing the world next year is the result of more than one failed US harvest. To understand the full magnitude of the problem, it is necessary to understand the 3 global factors driving the crisis, and how the USDA’s misinformation has made the situation far worse.

1) Surging Chinese demand for raw materials, especially food staples

I have been predicting hyperinflation would start in China, leading to the dollar's collapse. Now it is happening. Chinese efforts to boost domestic consumption while supporting exports with its dollar peg and adopting loose monetary policy are creating enormous demand for raw materials. As a result, China is sucking up the world's supply of raw goods, putting massive upwards pressure on commodity prices, especially soybeans.

The dollar peg fuels demand from Chinese export sector

Since the dollar September last year, the yuan has been hovering around 6.83, as shown in the chart below.

As the Chinese yuan has been pretty much pegged to the US dollar and the dollar has been quickly losing value, the yuan has depreciated 6.9 percent since February this year, greatly helping China’s export sector. September's month-on-month import and export numbers showed the seventh consecutive month of positive growth since March. While China's exports have dropped significantly, its market share has not, and its trade surplus keep growing.

The dollar peg, by subsidizing China's export sector, is creating tremendous demand for raw materials.

China’s exploding money supply driving up demand

As I explained in my article on Hyperinflation in China, China’s dollar peg and trade surpluses fuel monetary inflation.

The US's trade deficit requires China to print money!

The little discussed downside of the dollar peg is all the money China has to print to maintain it. China's Central Bank puts the extra dollars it receives from its trade surplus into its growing foreign reserves and then prints yuan to pay Chinese exporters. This results in an increase in China's base money supply by an amount equal to the increase in its foreign exchange reserves. While China's ability to keep accumulating US reserves is endless, its ability to keep its money supply under control is not.

China’s money supply has exploded since China re-pegged. Beijing has scrapped lending quotas, adopted a loose monetary policy, and kept interest rates at four-year lows to bolster liquidity and promote growth. The policy has obviously worked: Chinese banks have extended a massive 8.67 trillion yuan ($1.27 trillion) in new loans this year. To put this lending in context, consider the following:

A) 8.67 trillion yuan far exceeding the China’s initial full-year target of 5 trillion yuan.
B) New bank lending in the first nine months of this year is up 250 percent from the same period last year.
C) China has lent out more money in the first four months of this year than in the whole of 2008.

The effects of all this overextension of credit can be seen in the graph of Chinese money supply growth below.

China’s increasing supply of Yuan means that a lot more money is chasing its domestic supply of commodities, and bank lending is multiplying the effect of the government's spending. As a result, the prices of commodities in China are higher than the rest of the world, and this price imbalance is leading to record commodity imports (Chinese producers are buying commodities abroad rather than pay higher domestic prices).

China has no plans to abandon its loose monetary policy.

Chinese Working To Boost Domestic Consumption

China is turning to its poorer residents to help revive growth instead of Western consumers. It is dismantling all the measures it put in place over the years to suppress demand to fight inflation. It has dropped restrictions on purchasing property, eliminated price controls, got rid of loan quotas, lowered interest rates, ceased its sterilization efforts, etc… China has also been speeding up economic and political reforms to boost domestic consumption. A few of the measures include:

1) Raising subsidies for auto replacements from 1 billion yuan to 5 billion yuan.
2) Allocating 2 billion yuan to encourage home appliance upgrades.
3) Allowing non-deposit-taking institutions to offer consumer loans to Chinese citizens
4) Slashing the minimum financial requirement for commercial property investments for the first time in 13 years (from 35 percent to 20 percent).
5) Earmarking 6 billion yuan (878 million dollars) for low-rent house building projects across the country.
6) Issuing new rules to allow insurers to invest in corporate bonds without bank guarantees and allow smaller insurers to trade stocks directly.
7) Creating its own "NASDAQ" (the ChiNext).
8) Encouraging the creation of new commodity derivatives (trading in steel futures, rice futures, and polyvinyl chloride (PVC) futures have been launched this year).
9) Promoting Shanghai as a global financial center and a major gold trading market.
10) Supporting eleven national research programs with at least 62.8 billion yuan.
11) Quickly expanding its social security net and allocating 728 billion yuan ($106 billion, a 29.4 percent increase from prior year) for education, medical and health care, social security, employment, low-income housing and culture.
12) Developing its own credit rating agencies and sovereign credit rating standards
13) Opening its capital markets and currency to the world.

China’s efforts are working. Domestic consumption has become the driving force of the nation's growth. China has already surpassed the United States last January to become the world's largest auto market based on monthly sales. Chinese web shopping is reaching record highs. Additionally, with a significant part of China's population at the age of peak consumer spending, domestic consumption holds the potential for a period of extremely rapid growth over the next decade.

China's efforts to boost consumption (economic liberation, massive government spending, etc...) are hugely inflationary, creating tremendous hunger for raw materials.

Chinese demand driving commodity prices

Strong Chinese demand for the raw material is driving up commodity prices across the board. China is importing record quantities of everything from wood to sugar. The price of copper, used for autos and construction, had its biggest six-month gain in 22 years as Chinese buyers boost imports to records to replenish stockpiles. Chinese demand has also been a key driver of US soybeans prices this year. First quarter imports alone were up an incredible 31% from the same period in 2008. The Chinese government has been purchasing soybeans to protect the interests of domestic peasants and encourage them to keep planting. This is forcing China to import more soybeans from America.

Eventually Chinese demand will drive up commodity prices to an extent which forces it to drop the dollar to contain domestic inflation. Judging by its incredible levels of commodity imports, this event will happen in the very near future.

2) Just-in-time inventory system facing collapse

Since 1980, a combination of oversupply, ultra high interest rates and new business practices quickly turned the idea of owning extra inventory into financial heresy of the highest order, leading to just-in-time inventory management. Just-in-time inventory management means that everything is delivered just as it is needed or nearly so, which lowers inventory levels and frees up cash for other purposes. The last two decades of low inflation have lulled purchasing managers into believing that needed materials would be cheaper tomorrow than today, leading to the widespread use of just in time systems. In almost every corner of the globe and in almost every organization, spartan inventories have become an essential cost-cutting measure to remain competitive.

Users of commodities and manufactured goods today have business models that rely on weekly, or even daily, calculations to determine their inventory needs. For example, Wal-Mart tries to keep much of its inventory on the road in trucks to maintain low costs and flexibility.

Unfortunately there is a problem: just-in-time inventory is COMPLETELY DEPENDENT ON A STABLE DOLLAR. In a high inflation environment, every act of restocking inventory becomes a painful experience, destroying the just in time management’s cost saving justifications. If the dollar goes into a freefall, the entire global just-in-time system will collapse.

Today’s lack of Inventory isn’t confined to private sector

The US government is completely out of wheat. The last of the US government's wheat reserves, held in the Bill Emerson Humanitarian Trust, were quietly sold in May 2008 onto the domestic market for cash.

With government wheat stocks totally exhausted, the US has nothing left in its emergency food pantry. There is no cheese, no butter, no dry milk powder, no grains or anything else. This lack of emergency preparedness is the fault of the 1996 farm bill which eliminated the government's grain reserves as well as the Farmer Owned Reserve (FOR). Government wheat holdings have been steadily dropping over time:

A) Averaged 358 million bushels for the decade of the '80s.
B) Averaged 133 million bushels for the decade of the '90s.
C) Dropped steadily until zero in May 2008

Management of US wheat stocks have now defaulted to the private free-market sector, and the private sector has no plans for any kind of minimum wheat stocks that would protect the American public from a price and/or availability standpoint. In July 2008, on-farm wheat stocks were at 25.6 million bushels, the lowest level of on-farm wheat stocks since the USDA started keeping tabs back in 1934. Any decline from global production could precipitate greater wheat exports from America wiping out already low domestic wheat stocks.

The problem of low food reserves isn’t confined to the US either.

Rebuilding Reserves: Many nations adopted "just in time" inventory policies during the late Nineties to reduce the expense of maintaining large food reserves. The lowering of trade barriers and the advent of the World Trade Organization promised quick access to world supplies in case of drought or temporary shortage. However, many countries are beginning to realize the error of not maintaining adequate reserves due to recent spiraling prices. An example of this dilemma is China’s corn situation. From 1999 through 2006, China’s corn reserves fell from 123.8 to 32.5 million metric tonnes, or 74 percent. Now, the USDA is projecting 2008 ending stocks at 28.1 million tonnes, a reduction to the lowest level in 30 years. Now, many nations are planning to rebuild reserves, which will only add to global demand in years ahead.

3) Catastrophic fall in global food production

There was a catastrophic fall in global food production this year. The reasons for this decline are:

Water shortages

Of all the environmental trends that are shrinking the world's food supplies, the most immediate is water shortages. Water tables are falling around the world and Aquifer (underground pools of water) are being depleted. This Aquifer depletion poses a particularly serious threat to countries which rely heavily on irrigation to grow crops, like China and India.

Also, while most aquifers can be replenished, Fossil Aquifers are not replenishable, and in arid regions (southwestern United States or the Middle East) the depletion of fossil aquifers means the end of agriculture altogether. Fossil Aquifers are stored in deep pockets under heavy rock sediments, and these aquifers take thousands of years to build/recharge. When water is pumped out a Fossil Aquifer to grow crops, that water dates back to rainfall from the age of the mastodon, 12,000 or more years ago. Depleted fossil aquifers become vulnerable to contamination (from ocean salinization or industrial toxification) and ultimately extinction. For example, coastal fossil aquifer areas in parts of Bangladesh and India, which have fed rice paddies for thousands of years, are now taking in salt water. The immediate result is the end of the rice crop as rice paddies are slowly saturated with salt water rather than fresh water.

Saudi Arabia is the first country to publicly reveal how aquifer depletion will shrink its grain harvest. To become self-sufficient in wheat in the 1970s, Saudis developed a heavily subsidized irrigated agriculture based on pumping water from a fossil aquifer over a half-mile below the surface. By 2008, this fossil aquifer has been largely depleted, and, after being self-sufficient for over 20 years, Saudis have announced that they will phase out wheat production by 2016. Saudi Arabia will then be importing roughly 14 million metric tons of wheat, rice, corn, and barley for its Canada-sized population of 30 million people.

In China, over-pumping has largely depleted the country’s Northern shallow aquifer has forced well drillers to turn to the region's deep fossil aquifer. This non-replenishable aquifer is dropping at a rate of nearly three meters per year. As water tables fall and irrigation wells go dry, China's wheat crop, the world's largest, is shrinking. After peaking at 111 million metric tons in 1997, the harvest fell to 103 million metric tons in 2008, a drop of seven percent within a decade. China is already dependent on imports for nearly 70 percent of its soybeans and soon it will be importing massive quantities of grain as well.

In India, millions of shallower tube wells have already dried up, bringing a spate of suicides among farmers who rely on them. Electricity blackouts are reaching epidemic proportions in states where half of the electricity is used to pump water from depths of up to a kilometer.

Himalayan glaciers melt

Longer term, the water situation is even scarier. Two billion people face acute water shortage this century as Himalayan glaciers melt. The Tibetan plateau (The glaciers of the Himalayas) is the faucet for much of Asia's drinking water, and the melting glaciers of the Himalayas feed the major rivers of China, India, Pakistan, Nepal, Bhutan, Bangladesh, Myanmar, Thailand, Vietnam, Laos and Cambodia. The shrinking Himalayan glaciers, which could melt entirely by 2035, will turn Chinese and Indian rivers like the Ganga and the Yangtze into seasonal rivers that dry up in summers, when irrigation needs are greatest. The countries dependent on the glaciers of the Himalayas contain 85 percent of the people in Asia and nearly half the world's population. The situation is an international political time bomb.

Desertification

Desertification refers the spread of existing deserts and the creation of new ones. desertification isn't the result of global warming (thought it is possible global warming is making it worse). It is the result of reckless and extensive overuse of drylands around the world.

1930's Dust Bowl is a perfect example of desertification. When the United States entered an economic recession in the 1920s, farmers in Western states tried to raise profits by plowing and planting more acreage with new mechanized farming methods. Within a decade, a massive drought hit the entire country. Strong winds swept across the Great Plains, stirring up loose topsoil that had been displaced by overplowing and overgrazing of cattle. The results were dozens of epic dust storms that swallowed whole cities in black clouds and turned day into night.

Today, the UN is warning that parts of the world could become 'economic deserts', unviable for people or agriculture, and may have to be abandoned. Even in rich countries, people are hitting the limits of what can be done with money and infrastructure because there simply isn't enough water anymore. Disaster is feared as desertification spreads.

1) In China's northwest, desertification has escalated from 1,560 sq km annually in the 1970s to 2,100-2,400 sq km in the 1990s. Dust storms from the Gobi desert regularly blow through Beijing, and the government's response is getting more desperate: Chinese authorities have begun telling hundreds of villagers that farming will cease and that they will have to give up their animals.

2) Strong desertification processes have been developing in Latin America with several countries of the region, as well as significant sectors within some countries, in a state of water stress. This situation is projected to worsen significantly over the medium term.

3) Decades of war and mismanagement, compounded by two years of drought, are wreaking havoc on Iraq's ecosystem, drying up riverbeds and marshes, turning arable land into desert, killing trees and plants, and generally transforming what was once the region's most fertile area into a wasteland.

4) The Sahara desert is encroaching into the Nigerian landmass at the speed of 600 meters per annum, thereby threatening the country's food base. Most villages in the northern states have already been overtaken by sand dunes.

5) 90 percent of the water in Lake Chad, which is considered to be the sixth largest in the world and is bordered by four countries (Chad, Niger, Nigeria and the Cameroon) has been lost to the adverse effects of climate change. Lake Chad served as source of fresh water to the more than 30 million people living around its bank.

6) The Sahara Desert is crossing the Mediterranean, and the livelihoods of 6.5 million people living along its shores could be at risk.

7) 74 million acres of fertile land along the Mediterranean is turning to desert, giving rise to the term Sahelisation (ie: becoming part of the Sahara desert).

8) In Egypt, brackish groundwater has already compromised half the country's farmland.

9) Aquifers around the Po Delta in northern Italy are also showing signs of saltwater contamination.

10) Spain has implemented its first Program of National Action against Desertification after recognizing that 37 percent of the country is at risk from desertification and is in danger of becoming "eroded forever".

11) A new desert is forming 250 km from the 'Garden City of India', Bangalore. This new desert is the result of continued indiscriminate water use by village inhabitants even as sand from floods and wind started covering the region. Now thousands of acres of land are covered by sand dunes.

12) This September, Sydney residents woke to scenes from a Hollywood apocalypse movie as the worst dust storm in 70 years, carrying an estimated 5 million tons of soil from drought-ravaged farmland, turned the sky blood red.

Save for the Antarctica, desertification affects all continents. New deserts are growing at a rate of 20,000 square miles (51,800 square kilometers) a year. More than 70 percent of drylands in Africa, Asia and Latin America that are being used for agricultural purposes are already experiencing the effects of desertification. Desertification leads to famine, mass starvation and unprecedented human migration.

Low commodity prices

The low prices at the end of 2008 discouraged the planting of new crops in 2009. In Kansas for example, farmers seeded nine million acres, the smallest planting for half a century. Wheat plantings this year are down about 4 million acres across the US and about 1.1 million acres in Canada. So even discounting weather related losses, the US, Canada, and other food producing nations are facing lower agricultural output in 2009.

Lack of credit

A lack of credit for farmers curbed their ability to buy seeds and fertilizers in 2008/2009 and will limit production around the world. The effects of droughts worldwide will also be amplified by the smaller amount of seeds and fertilizers used to grow crops.

Prices may rise because a lack of credit for farmers curbed their ability to buy seeds and fertilizers and may limit production

Adverse weather conditions

Widespread drought in Asia is causing a sharp drop in food production. The drought which developed in China, India, Indonesia and the Middle East, is stems from a growing El Nino influence.

Australia

Australia's drought is the longest running and most severe on the planet. Twelve years ago, the rain stopped falling with any consequence in Australia's prime food-growing region, bounded on the south by the Murray River and the west by the Darling.

Currently, November temperature records are being broken all over eastern Australia. With the wheat harvest, well underway lower yields than expected are being reported.

Profarmer Australia has cut their Australian wheat production estimate by 1 MMT to 20.9 MMT, and Commonwealth Bank of Australia reduced their estimate by 0.7 MMT to 21.6 MMT (USDA's current estimate is, of course, is an insane 23.5 MMT).

India’s spring harvest

Wind, rain, and hail ruined India’s spring wheat crop. India’s policy of buying all wheat at the same price, “whatever the quality”, has made the situation worse by encouraging farmers to focus on quantity rather than edibility. Furthermore, grain reserves overflowing with rotting wheat means that the already poor quality of India’s harvest will be worsened due to lack of storage space. Finally, big companies have been holding off purchases due to misguided deflation fears, which means a lot of pent up demand chasing a lot of “discolored and shriveled” wheat.

India is now left with large stockpiles of rotting, inedible wheat and a harvest that is a complete disaster.

India’s fall harvest

Almost half of India, the world’s largest producer of rice, wheat and sugar, is reeling from a drought caused by the driest monsoon in 37 years. In terms of affected area, India’s drought is now the worst since 1918. Farmers who can no longer irrigate now fear nothing will be left to drink. Millions of poor villagers across southern India are facing an imminent food shortage following months of intense drought and recent devastating floods.

Due to drought, India is facing a net deficit in oilseeds of 1.5 million metric tons. Summer soybean production in India has also fallen sharply due to a failed monsoon in 2009.

China

Back in February, this year Northern China was hit by worst drought in 50 years. Chinese wheat production was predicted to be down 10% "In A Best Case Scenario". The sustained drought lead to water and food shortages in June for more than 1.37 million people in northwest China's Ningxia Hui Region.

The persistant drought in Central-East China will reduce the region's rice production, and Chinese corn production is expected to shrink at least 10% due to severe summer drought in the Northeast. Corn shortages will develop by spring-summer of 2010.

For more on droughts in other parts of the world, see my article *****Catastrophic Fall in 2009 Global Food Production*****.

Government misinformation has made situation worse

The food crisis SHOULD have started Last June. Prices would have risen and rationed demand, leading to a higher ending stock at the end of 2008/09, which would have greatly lessen the shortfall and pain for 2009/10. Unfortunately, this did not happen.

At the beginning of last June, concerns were mounting over the sharp rise in food costs. Faced with the terrible outlook for 2009 global wheat output, agricultural markets were getting fairly nervous about the tightness in food stockpiles. China was chewing through US old-crop soybeans with month after the month of record exports. Hedge funds and other big institutional investors had begun to pour money into the agricultural market, helping to drive commodities prices higher against the weakening dollar.

Against this backdrop, the USDA began a campaign to suppress rallying food staples. To start off, the USDA magically discovered an extra 113 million bushels of soybean supply within its “residual use” accounting column to ensure soybean end stocks would not slide below 100 million bushels. Even worse, the USDA began releasing production estimates which were pure madness. For example, despite a 40% drop in planted acreage, The USDA left their production estimate for Argentina's wheat crop unchanged at 11 MMT, a stunning 33% higher than last season’s 8.3 MMT (The Buenos Aires Grain Exchange Argentine was predicting a 6 MMT wheat crop at the time). The USDA also announced that wheat ending stocks would increase in 2009/10 and that world wheat stock to use ratios would climb to a comfortable 28.5pct. The media became filled with bearish stories based on the USDA’s bearish propaganda: the US will not run out of beans, prices will ration demand, China have more than enough and will go away, etc. Rumors of cancelled soybean exports sales were widespread (these cancellation never happened). To culminate everything, on June 30^th the USDA shocked the trade with estimates showing record soybean and near record corn plantings. Somehow, the USDA found a million more wheat acres, one and a half million more soybean acres AND two million more corn acres than they had in March!

Given the stark contrast between USDA numbers and reality, there is no way that the flawed data released last June was an innocent mistake. The USDA deliberately mislead investors about the true state of the world's food supplies.

The August 2009 Soybean Crisis

While the USDA might have successfully changed perceptions about the food supply, it could not alter the reality. With Brazilian soybean supplies on the open market having all but ran out, the US was left as the only shop in town, resulting in monstrous soybean sales to China. By the end of August grain movement in the US came to a virtual standstill, with farmers are mostly sold out of soybeans. Those few soybean end-users (ie: feedmakers and poultry producers) were caught short, and were forced to pay prices as high as they paid at the very height of the bull market a year ago in 2008.

Soybean shortage causes intense backwardation

The struggle to secure quick-delivery soybeans in the US cash markets sent soybean futures into intense backwardation (backwardation is when cash prices are higher than future prices). Desperate Midwest crushers were bidding up to $2.72 a bushel over CBOT September futures contracts to acquire scarce soybean supplies. Some processors in the heart of the Midwest soy belt grew so desperate for soybeans to crush that they paid to transport some of the early harvest from the Mississippi River Delta northward to Illinois.

The chart below shows the backwardation of soybean futures on August 28. Notice the huge price gap between promises to September and November contracts. Notice the even larger gap between cash prices and September futures.

The threat posed by soybean backwardation

Futures markets are dependent on confidence in the same way as banks. Futures markets offer promises to deliver commodities on specific dates (commodity IOUs) and Bank offer deposits, which promises to deliver cash on demand (dollar IOUs). Futures markets and banks issue far more IOUs then they have cash and commodities on hand to make good on these promises. For both futures markets and banks, a loss of faith in the ability to make good on these IOUs is fatal. Had the backwardation in soybeans continued into September, a panic could have quickly developed, spreading other agricultural commodities.

New wave of USDA propaganda

The intense backwardation in soybeans did not last. In the first week of September, the US launched a new attack on soybean markets which included:

1) More insane production estimates predicting a record breaking soybean crop.

2) Rumors that China was planning on unilaterally terminating OTC soybean derivative contracts (ie: more rumors about China cancelling outstanding export sales).

3) Rumors about a huge supply of old crop soybeans that were going to be dumped on the market to make way for the “record” 2009 corp.

4) The sale of 104.5 million bushels of soybean futures to reinforce the idea that soybean prices were headed for collapse.

5) Helpful news stories warning farmers about a imminent price collapse and suggesting they sell before its too late.

Below is a good example of what this USDA propaganda looked like:

PRICE COLLAPSE LOOMS

Despite the strength of the current market, observers said prices could easily plunge as the Midwest soybean harvest finally gets rolling in late September or early October.

Barring an early freeze that could cut yields, U.S. farmers are expected to bring in a bumper crop. The U.S. Department of Agriculture has projected U.S. soybean production at 3.199 billion bushels, an all-time high.

Export buyers and crushers may find themselves awash in soybeans, triggering a collapse in the cash market.

"When it breaks," the eastern soymeal broker said, "it's going to be swift and violent."

The USDA’s scare tactics worked and pressure in the soy cash market eased as. Soybeans trickled into grain terminals and processors in Nebraska, southern Illinois and Iowa as farmers sold their stocks before the “price collapse”. Old crop sales saw net cancellations of 58.8 TMT as buying switched to the cheaper new crop with 1.11 MMT export sales. Exporters backed off their spot soybean bids. Crushers decided to shut down for two weeks and wait for new-crop beans to be available. Soybeans on the Chicago Board of Trade fell to a five-month low.

The consequence of USDA propaganda

Despite what the USDA wants us to believe, the food situation hasn’t improved. There is no bumper US harvest bail the world out. Asian demand for US soybeans is surging. The reality of food shortages in 2009/10 remains unchanged.

On the other hand, USDA propaganda has succeeded in making the situation much worse.

1) Waiting for new crop has created a lot of pent up demand


Many US processors extended their plant downtime maintenance in July due to both weaker profit margins and the unwillingness to outbid exporters for spot soybeans.
As a result, US soybean consumption has plunged in the last three months, as seen in the graph of monthly US soybean crush data below.

All the soybean crushers who shutdown production waiting for the new crop will be crushing far more soybeans than normal to make up for lost time, which means there is a lot of pent up demand.

An insane amount of outstanding export sales for US soybeans

Below is a graph of total outstanding export sales for US soybeans going back ten years (data straight from the USDA’s website). As of October 16, the US has already committed to exporting 19,716,862 Metric Tons (724 million bushels) of soybean from the 2009 crop. The United States has never had a backlog of exports sales this size. If the USDA’s record harvest never comes in, things are going to get ugly real fast!

Everyone is waiting for the record harvest that doesn't exist!


2) Low prices are causing to overconsumption and underproduction

New crop of soybeans is already being rapidly consumed: early harvest from the Mississippi River Delta is being shipped to desperate Midwest crushers.

Even governments are being duped by the USDA production estimates, with grain exports pouring out of desperate Ukraine. Despite is 20% fall in grain production, cash-starved ukraine continues to export grain ahead of even last season's record pace. Because they are unaware of the food shortage facing the world, distressed sellers like Ukraine are mismanaging their grain supplies, and will have little grain available for export during the second half of 2009/10 (when global food shortage will be at its worse).

Ffarmers are allowing millions of bushels to rot in the rain because it is too expensive to harvest and dry them at current prices...

3) The USDA’s false estimates will lead to panic

Below are the latest USDA estimates for soybean production, imports, and exports. I highlighted in red the numbers that are worth noticing.

Thousand Metric Tons
Date Created 10/9/2009 8:44:57 AM

Some of the glaring problems with these estimates for 2009/10:

1) The USDA expects the United States to harvest a record breaking 88.454 MMT (Million Metric Tons). With soybean fields buried in snow across the Midwest, this seems highly unlikely.

2) Despite predicting that Chinese soybean production will drop by 1 MMT in 2009/10 (from 15.5 MMT to 14.5 MMT), the USDA is also predicting China will import 1.2 MMT less (from 40.7 MMT to 39.5 MMT). That makes absolutely no sense! If Chinese demand for soybean is soaring (see above) and Chinese production is down, for what possible reason would the USDA predict China’s soybean imports to be less in 2009/10?

3) India is suffering from the worst drought in over forty year, yet the USDA is expecting Indian soybean production to fall only 1% in 2009/10!

4) The USDA is predicting a 2% increase in soybean exports for 2009/10! In light of surging Asian demand for soybeans and the huge amount of export sales outstanding, predicting that the US will export only 35.5 MMT of soybeans is simply ridiculous.

The USDA's numbers don't add up. The shortages of wheat, soybean, sugar, etc will soon reach the point where no about of spin can hide them. As the world will realize there are a few a few months food supply missing, faith in the USDA will crumble, and panic will start. Prices of agricultural commodities will double or triple (sending the dollar into a freefall).

Other governments also covering up looming food catastrophe

The US isn’t the only government downplaying food shortfalls. In this regard, India is nearly as bad. As one Indian reporter writes, governments are lying about the looming food crisis.

… some experts and governments, in full cognizance of the facts, want us not to create panic and paint a picture of parched crops and a looming food crisis. This, they say, would push up food prices unnaturally, lead to hoarding and ultimately result in a situation where many more millions across the world would go hungry. And whether it is the developing world or the developed, it is those at the bottom of the pyramid who are the most affected in such scenarios.

This leads to a confusing divide between reality and government pronouncements, or even between the perspectives of government departments.

In Indian government is also releasing insane production estimates. Below is an example of such Indian propaganda (with my comments ridiculing them).

India, the world’s second-biggest wheat grower, expects to harvest a record crop for a second year as a revival in monsoon over the past month raises water levels in major reservoirs, a government official said.

Output may be 2 million metric tons more than the record 80.6 million tons gathered last year, Agriculture Commissioner N.B. Singh told reporters today. Winter-sown rice harvest may be higher by 3.5 million tons from a year ago, he said.

[India has finally figured out its problem: too much rain. Now that it has finally experienced a severe nation-wide rain deficit, it will be able to harvest the 82.6 million ton of wheat it never could when rains were plentiful. Maybe if Indian farmers set their crops on fire, that would improve yields too! (sarcasm)]

Almost half of India, the world’s largest producer of rice, wheat and sugar, is reeling from a drought caused by the driest monsoon in 37 years.

The graphic below illustrates how ridiculous the situation is:

For the record, guess what the USDA’s estimate for India wheat production is: 80.6 MMT ! Check the USDA’s website to see for yourself. If you haven’t figured out the trend by now, all USDA production estimates are inflated beyond all reason.

World is heading towards disaster

As a result of governments covering up about the looming food shortage over the last few months, there has been no stockpiling (which would have help ease the crisis). Worse, with the USDA predicting record crops for everything under the sun, end users were convinced to shift demand from 2008/09 (when world had a bumper harvest) to 2009/10 (which saw a catastrophic fall in production).

I am moving to Russia later this year and am moving forwards with setting up a fund to invest in Russian agriculture. Please Email me if you are interested.

Eric de Carbonnel

Market Skeptics

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