Prime Iowa, Minnesota Corn Country Faces Drought

Prime corn-growing regions of Iowa and Minnesota are facing challenges similar to the last major drought in the region in 1988, causing some growing concern in a year starting with tight corn supply.

Some of the more productive parts of northwest Iowa and southern Minnesota are under pressure, and there's little relief seen to be coming at this time.

While the weather this year is in fact very similar to 1988, the one difference is it is happening earlier than that disastrous year, and so has more time to rebound if wetter weather arrives.

Of course if that doesn't happen, there will be some production and supply problems emerging from the area. If it continues, expectations are parts of eastern Nebraska could be affected as well, and it could spread from there; although that is more the worst case scenario.

In 1988, on average, the drought resulted in about 25 percent less yields for corn.

One major change in corn farming since than has been more drought-resistant corn seed, which should help alleviate some of the effects of dry weather.

That would make it better than 1988, but it would still have a major impact if the weather patterns don't change.

You can see on the map how conditons look at this time.

Archer Daniels Midland (ADM) Crunched on Earnings Miss

Shares of Archer Daniels Midland (NYSE:ADM) got hammered Tuesday, dropping over 4 percent (including after hours trading), as higher corn prices weighed on the company's performance in the last quarter.

Other notable factors having a significant impact were miniscule margins for oilseed processing, as well as the changing global supply market for grains.

For the latest quarter, net income plummeted to $80 million, or 12 cents a share, a dramatic fall of 89 percent from last year in the same quarter, where the company generated a net income of $732 million, or $1.14 a share.

Taking into account one-off events, earnings came in at 51 cents a share, down by 58 percent over last year.

Profits for its agricultural services business were under heavy pressure for the quarter, dropping 63 percent, with the company citing “poor international merchandising results and lower US export volumes.” That particular unit acquires grain from exporters and sells it to importers.

Recognizing the ongoing challenges, early in January 2012, Archers Daniels Midland said it's going to lay off 1,000 workers.

ADM closed Tuesday at $28.63, falling $1.08, or 3.64 percent.

Brazil Drought Effect Downgraded

The severity of the effect of the ongoing drought in Brazil's Parana state, located in the southern region of the country, is worse than originally believed, according to a Dow Jones Newswires report.

Agroconsult's Fabio Meneghin, said, "The western part of Parana, near the border with Paraguay, has been particularly affected. I didn't expect it to be so bad."

Quoting one farmer from the region, the story said corn losses are estimated to be 40 percent on his farm, with soybean losses even higher, estimated to be about 60 percent.

There was no rain in the region for about 45 days, added the farmer.

Ukrainian Corn Planting Expected to Jump 25 Percent

According to the Ukrainian Agribusiness Club, the amount of corn sownin 2012 could rise as much as 25 percent, climbing to 11.1 million acres (4.5 million hectares).

Corn production could be as high as 25 million metric tons, in contrast to the 22.8 million tons yield in 2011, the organization said in a statement e-mailed to Bloomberg.

Michigan Corn Produces Record Yields

After a dubious start to the 2011 corn season, where cold weather and wet fields delayed the Michigan corn planting season, it ended strongly, with corn rising to a record yield of 153 bushels and acre, according to the Michigan Field Office of the U.S. Department of Agriculture National Agriculture Statistics Service.

Jay Johnson, director of the USDA NASS Michigan Field Office, said, "The pollination period had ideal conditions, the weather cooperated, and we escaped what could could have disastrous crop. We had ideal conditions throughout the season in most of the state."

A significant number of Michigan farmers weren't able to complete planting until the first week of June, a full month later than usual.

Johnson said the reason for the higher yields is attributable to breakthroughs in seed quality as well as technological improvements.

Iowa Corn Profits Projected Lower for 2012

Chad Hart, Iowa State University agricultural economist, said the outlook for corn profits for state farmers doesn't look as good as it did in 2011.

“In Iowa, we’re projecting season-average prices to range between $5.30 and $5.40/bu., and we’re projecting inputs costs to be about $4.40/bu. So, if that holds true, the market in Iowa will be offering 90¢-$1/bu. in profits to grow corn for 2012. Returns from growing corn in Iowa last year have averaged about $1.60/bu., but that corn is still being sold,” Hart said.

Economic uncertainty continues to weigh on corn overall corn profits, in Iowa, and elsewhere in the U.S. Prices could fall as low as $3 a bushel, but could rise as high as $7 a bushel, according to Hart.

All factors inputed, I would bet on a more downward movement in price than upward for corn in 2012.

Corn, Ag, Looking for Direction

A variety of factors have generated uncertainty for corn and other agriculture futures, as corn was the only pit ending the Friday session higher.

Continual macro-economic concerns over the European debt crisis, as well as the extent of the corn production, and other crop shrinkage in South America related to weather, has made traders tentative.

Another factor in the mix is the hint of an export ban in Russia, which would offer up more support.

Expectations are grains still have some room to move upwards before leveling off or falling.

Friday corn closed 7 1/4 cent a bushel higher on the nearby contract, ended the trading day at $6.41 3/4.

Nearby contract for soybeans dropping trading 3 3/4 cents and 6 1/4 cents lower, to $12.19 and $6.47 1/4.

Corn Exports Up 25 Percents Says USDA

A U.S. Export Sales report from the USDA siad that corn exports for the week were up 940,700 MT from last week.

Top export regions, according to the report, were Japan (214,000 MT), Mexico (193,300 MT), South Korea (126,700 MT), China (120,200 MT), Saudi Arabia (70,200 MT), and Taiwan (48,700 MT).

The announcement by the Federal Reserve that it was going to keep interest rates supressed through 2014, had a positive impact on corn futures, which were up on Wednesday's close, and were called up 8 to 9 cents on Thursday.

Argentine Corn Farmers Hit by Heat Wave

The effects of La Nina continue to wreak havoc in Argentina, as well as Mexico and Brazil, as corn farmers in Argentina could lose up to 33 percent of the corn for the 2011-2012 season.

Already struggling from recent drought conditions, the projections are the corn in the Pampas agricultural zone will experience drought conditions through February 2.

Expected tempertures are expected to go above the 104 degrees Fahrenheit in parts of the region, with little rain expected to dampen things down.

Rick Tolman, chief executive officer of the National Corn Growers Association, said this in Buenos Aires, “It looks very similar to what we experienced in 2011." He added that the rain “seemed to be timely enough to help the soybean yields, but for a lot of the corn, it may be too little, too late.”

The worst case scenario for Argentina could result in the harvest dropping to as low as 20 million tons, 10 million less than the 30 million projected.

For the December through March season, the estimated corn havest was cut from 7.4 million tons to 6.1 million tons. The soybean harvest estimates were slashed from 14.1 million tons to 11.7 million tons during the same period.

Archer Daniels Midland (ADM) Ratings Reiterated

Archer Daniels Midland Company (NYSE: ADM) had its “Neutral” rating reiterated by Goldman Sachs (NYSE:GS).

Looking forward to the release of its quarterly report on January 31, 2012, analysts' consensus is for earnings to drop to 78 cents a share, from $1.14 a share last year in the same quarter.

Earnings are expected to come in at $2.98 a share for the fiscal year. Revenue for the year is estimated to be $89.56 billion. Quarterly revenue is estimated at $23.1 billion, a gain of 10.4 percent over last year.

The majority of analysts recommend for investors to hold on ADM. Over the last quarter sentiment on the company has improved a little.

Archer Daniels Midland closed Thursday at $29.84, dropping $0.24, or 0.80 percent.