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GRAND RAPIDS, Mich. (WOOD) - With the dry conditions, Michigan corn farmers are keeping a close eye on their crops.
The experts at the Michigan Corn Marketing Program said it will be between six and eight weeks before it's clear how bad the corn yield will be. But without rain, they're expecting significantly lower yields, which could drive up the price of food products including corn, beef, milk and poultry.
Jim Zook, executive director for the Michigan Corn Marketing Program, said though the precise effects of the dry conditions on the corn aren't yet clear, the situation is "severe."
One saving grace, he said, may be technology. Since the drought of 1988, the type of corn hybrid used has become much healthier and more resistant to changing weather conditions, so it's not yet clear how it will hold up.
Corn is priced on the open market driven by supply and demand, Zook explained. As the price goes up, usage goes down, thus balancing out the price.
A $2 increase in price per bushel of corn will translate into less than a three cent increase in the price of a food item that is dependent on corn, like corn flakes and soda, as well as items dependent on corn used as feed, like eggs, milk, beef, turkey and chicken.
Grand Valley State Economics Chair Paul Isely said the fluctuating price of corn can have far-reaching effects beyond the checkout line.
"We've seen a general rise and we're reaching near-record levels for the price of corn," Isely said. "Today, however, the price of corn actually dropped. It dropped because we're starting to see a general movement away from corn to substitutes, whether it be wheat or gasoline, because we use a lot of corn in ethanol."
Isley said Tuesday's one-day corn price dropped from $7.33 per bushel to $7.17 per bushel.
He said farmers across the U.S. planted a record number of acres of corn this year at 94.4 million acres -- that's 5% more than what was planted last year.
Isely said about 40% of the corn crop in the United States is used for ethanol, and he said some of the ethanol plants are starting to shut down as the price of corn goes up and the price of gas goes down. He said right now, people are choosing to use more gasoline than ethanol.
"Right now we're not seeing anything as bad as 1988," Isely said. "We're also at a point in the corn crop if the weather would turn in the next few weeks, you would have a completely different story."
He said it is possible that if the weather turns for the better soon, Michigan farmers with decent yields could see modest gains as corn producers are faring much worse in other parts of the Midwest.
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