Business & Policy
By Kristy Nudds
The old saying that corn should be “knee-high by the Fourth of July” certainly did not hold true for much of the North American corn crop this year. As of early August, corn in some areas of Ontario and the United States is barely knee-high, and is withering away, unlikely to recover even after a few days of steady rain.
The 2012 corn crop was predicted by the United States Department of Agriculture to be a bumper one when seeding rates were tallied. Just days ahead of its Aug. 10 report, analysts are predicting a yield nearly 20 per cent lower than last year’s.
The scarcity of rain and scorching temperatures across the U.S. corn belt have been called “unprecedented” and many farmers have said they’ve never seen drought conditions like these. Ontario, too, is feeling the heat – some areas in the southwestern and eastern parts of the province are experiencing the worst drought in a generation, and crops are suffering.
Reduced yields and increased prices have led economists in the United States and Canada to estimate that food prices will increase by approximately three to four per cent in the coming year, putting pressure on households already cash-strapped from a slow-growing economy.
The drought has also reignited the food-versus-fuel debate. In 2005, the United States Environmental Protection Agency developed the Renewable Fuels Standard (RFS) program, which requires that 7.5 billion gallons of renewable fuel (the majority of this being ethanol from corn) be blended into gasoline by 2012. In 2007 this was increased to 13.2 billion gallons of corn-based ethanol, which is equivalent to roughly 4.7 billion bushels. Depending on what is harvested, this means that as much as four to six bushels out of 10 will be used for ethanol production.
Given that startling statistic, it is not surprising that a coalition of poultry and livestock groups have asked the EPA to waive the federal RFS mandate for 2012 and for the first half of 2013. They were joined by a bipartisan group of 156 members of Congress, who, when the RFS was created, pointed out in a letter to the EPA that unforeseen circumstances would require the EPA to “exercise flexibility” and urged the EPA to consider a “fair and meaningful nationwide adjustment to the Renewable Fuels Standard.”
At press time, the EPA has not made such an adjustment. The U.S. farm bill has also been stalled, although Republican leaders in the U.S. House of Representatives have proposed a $383 million disaster relief package that is aimed primarily at cattle and sheep producers. Crop growers will benefit from crop insurance; however, U.S. poultry producers are left without a significant safety net. President Barack Obama has urged Congress to pass the farm bill, saying, “Congress needs to pass a farm bill that will not only provide important disaster relief tools but also make necessary reforms and give farmers the certainty they deserve.”
Neither the relief package nor the farm bill were approved before the House took a five-week break in August; however, Obama has said he hopes lawmakers get an “earful” from constituents and return on Sept. 10 ready to work.
It will be interesting to see how the United States reacts to this disaster, and to what extent trickle-down effects will be felt globally, as so many countries are reliant directly or indirectly on the U.S. corn crop. If hot, dry summers are to be the “new normal” – as weather analysts predict – governments need to put serious thought, and funding, into future agriculture and energy policies.