Traveling throughout the Midwest, it is obvious that this year’s drought is the “real thing.” The
 crop damage has been more extensive than we have seen since the 1988 drought. In 1988 the drought was an “early drought” that saw some recovery later in the growing season. The drought of 2012 was a “late drought,” following an early, wet spring. The excessive heat just nailed the corn crop during pollination. Many in the markets have held out hope for late season rains to aid the soybean crop’s development. In some areas they received timely rains. Yet in other areas the crop is dying in the field.
 
On August 10th the USDA published their monthly U.S. supply and demand report. Their estimates suggest a 2.2 billion bushel reduction in the corn crop, bringing in a 10.8 billion bushel crop. The average U.S. corn yield was reduced 22.6 bushels per acre to 123.4 bushels as extreme heat and dryness continued during July across the Plains and Corn Belt. As forecast the 2012/2013 corn yield would be the lowest since 1995/1996. Soybean production for 2012/2013 is estimated at 2.7 billion bushels, down 358 million bushels due to the lower harvested acre and yields. U.S. wheat supplies for 2012/2013 were raised 54 million bushels with higher foretasted production and an increase in projected imports from Canada.
 
The drought of 2012/2013 is a fact and I don’t know much more to say about it without sounding like a “broken record.” I talk to people in the trade, read the newswires, and research. Everyone seems to be saying the same things. We all know that the crop is greatly damaged in many areas and that demand is strong.  The food/feed verses fuel debate has risen to a fevered pitch as ethanol production has once again become demonized.  Many in the grain industry are in a foul mood and looking for someone to
blame. The “blame game” does not change the fact that Mother Nature has been brutal to many grain producing areas in the United States this year. There will be no easy answers to the rationing job that the market must conduct this year. This is the nature of a business that is so dependent on forces out of our control.
 
I remember a conversation that I had with a veteran, Iowa farmer in the summer of 1988. I was farming in western Kansas at that time and was learning, firsthand the pain of a crop failure. I lamented that I was at the mercy of what did or did not fall from the sky. I told him that my son was born in February and he still had never heard thunder.  This farmer patiently heard me out and then stated that he had spent more years looking at the sky and wishing it would not rain, than wishing it would rain. He had never had a crop failure in his 40 plus years of farming.  I was stunned and left without much to say to him. I called him on the telephone a few nights ago and asked him how his crops were this year.  He paused from a moment and told me that he remembered our conversation all those years ago. He said, “I now know what it feels like to realize that the great crops that I have raised in all my years of farming were not of my doing.” That proud farmer was experiencing the humbling impact of a crop failure.  As I hung up the telephone that night, I know he would survive because he has great reserves of working capital that he has preserved throughout the years. He had found a Grain Angle that was a key to his success.