The Corn Belt also includes parts of Michigan and Kentucky. USDA's Current Crop Outlook for Corn and Soybeans

On August 12, 2008, USDA released the first survey-based forecast of corn and soybean production for 2008. According to USDA's forecast, U.S. farmers will produce the second largest corn crop on recordâ12.3 billion bushelsâup about 5% from the previous month's forecast, but down over 6% from the 2007 record crop. USDA's soybean production forecast of nearly 3 billion bushels is unchanged from the July forecast, but up 15% from 2007. These production forecasts reflect three factors. First, flood-related acreage losses appear to be substantially less than initially projected. Second, nearly ideal growing conditions that have persisted across the Corn Belt since late June have contributed to sharp increases in USDA's yield outlook for corn, thus, offsetting flood-related area losses. Third, despite a 17.6% increase in planted acreage in 2008, soybean production is flat due to a diminished yield outlookâlargely due to the lateness of the crop's planting and development, as well as dry conditions in the Delta, the Southeast, and the Northern Plains. USDA Re-Surveys Flooded Areas

USDA's August crop production forecasts reflect growing conditions as of August 1, and incorporate survey data from the flood-affected regions. USDA updates its crop production and market supply and demand estimates monthly. As with corn, final soybean yields may still vary based on growing conditions through the remainder of the growing season. The unusually cool, wet conditions persisted through spring 2008. But most damagingly, the rains triggered widespread flooding across the heart of the Corn Belt. In this regard, USDA has undertaken a broad range of activities in the flood-affected areas including rescue and clean up, food assistance, housing, community assistance, business assistance, and farmer and rancher assistance. Congress has appropriated nearly $480 million in emergency USDA funding specifically targeted to 2008 Midwest flood response activities as part of the FY2008 Supplemental Appropriations Act ( P.L. 110-252 ). Flood-related crop production concerns have added to this pressure and have perhaps contributed to the USDA decision on July 7, 2008, to announce that permission is granted in both presidential disaster and contiguous counties to use CRP land for grazing only. The potential weather- and flood-related production losses to this year's U.S. corn and soybean crops were unwelcome news to the market and, likely to contribute to higher commodity prices in June. Such concerns are likely contribute to volatile commodity prices, thereby, maintaining pressure on policymakers over concerns about consumer food price inflation, international food aid availability, and the soundness of policy that dedicates commercial agricultural crops to biofuels production, particularly corn used for ethanol.
Unusually cool, wet spring weather followed by widespread June flooding across much of the Corn Belt cast considerable uncertainty over 2008 U.S. corn and soybean production prospects. As much as 5 million acres of crop production were initially thought to be either lost entirely or subject to significant yield reductions. Estimates of flood-related crop damage varied widely due, in part, to a lack of reliable information about the extent of plant recovery or replanting in the flooded areas. These circumstances generated considerable market angst and U.S. agricultural prices for corn and soybeans, as reported on the major commodity exchanges, hit record highs in late June and early July. Since then, most of the Corn Belt has experienced nearly ideal growing conditions suggesting the potential for substantial crop recovery, and market prices have weakened accordingly.
On August 12, 2008, USDA released the first crop production estimates for corn and soybeans that have incorporated survey data from the flood-affected regions. According to USDA, U.S. farmers will produce the second largest corn crop on recordâ12.3 billion bushelsâin 2008, up about 5% from the previous month's forecast, but down over 6% from last year's record crop. USDA's soybean crop forecast of nearly 3 billion bushels is unchanged from July, but up 15% from 2007. These production forecasts reflect three factors. First, flood-related acreage losses appear to be substantially less than initially projected. Second, nearly ideal growing conditions that have persisted across the Corn Belt since late June have contributed to sharp increases in USDA's yield outlook for corn, thus, offsetting flood-related area losses. Third, despite a 17.6% increase in planted acreage in 2008, soybean production is flat due to a diminished yield outlookâlargely the result of the lateness of the crop's planting and development, as well as dry conditions in the Delta, the Southeast, and the Northern Plains.
Congress has appropriated nearly $480 million in emergency USDA funding, primarily for conservation activities in flood-affected regions, as part of the FY2008 Supplemental Appropriations Act ( P.L. 110-252 ). USDA has also committed resources to the flood-affected areas including rescue and clean up, food assistance, housing, community assistance, business assistance, and farmer and rancher assistance. In addition, USDA announced permission, on July 7, 2008, to use CRP land for grazing only in disaster and contiguous counties.
In light of current market uncertainties surrounding the 2008/09 supply and demand balance for corn and soybeans, and the outlook for extremely tight supplies by late summer, commodity market prices are likely to remain volatile through the remainder of the growing season. If crop production ultimately proves less than forecast (to be determined at harvest time), it will likely contribute to higher commodity prices, thereby adding to pressure on policymakers over concerns about consumer food price inflation, international food aid availability, and the soundness of policy that dedicates commercial agricultural crops to biofuels production, particularly corn used for ethanol.
This report will be updated as events warrant.