Midwest Floods of 2008: Potential Impact on Agriculture

Midwest Floods of 2008:
Potential Impact on Agriculture
Updated August 18, 2008
Randy Schnepf
Specialist in Agricultural Policy
Resources, Science, and Industry Division



Midwest Floods of 2008: Potential Impact on Agriculture
Summary
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
record — 12.3 billion bushels — in 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 outlook — largely 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.



Contents
Background ..................................................1
U.S. Corn Belt............................................1
USDA's Current Crop Outlook for Corn and Soybeans................2
USDA Re-Surveys Flooded Areas.............................3
Outlook for Corn Harvested Acres............................3
Outlook for Soybean Harvested Acres..........................3
Outlook for Corn Yield.....................................3
Outlook for Soybean Yield..................................4
Estimating Crop Losses for 2008..................................4
Unusual Spring Weather Across the U.S. Corn Belt...................5
Wet, Cool Weather Persists Since Late 2007....................5
Planting Date Is Critical for Optimal Yields.....................5
June Flooding Ravages Key Growing Areas.....................6
Flood-Related Crop Production and Marketing Issues.................7
Transportation Infrastructure Damage..........................7
Agricultural Processing and Storage Facilities Disruptions.........7
Livestock Losses and Disposal Issues..........................8
The Federal Response..........................................8
Designated Disaster Areas...................................8
Agricultural Assistance.....................................9
Potential Market Implications Due to Flood Losses..................10
List of Figures
Figure 1. Corn Belt.................................................2
Figure 2. Counties Designated as Presidential Disaster Areas...............6
List of Tables
Table 1. Estimated Corn Acres Lost Due to June 2008 Floods Based on
Predicted Abandonment Rates..................................12
Table 2. Estimated Soybean Acres Lost Due to June 2008 Floods Based on
Predicted Abandonment Rates..................................13
Table 3. Corn Area, Yield, and Production, U.S. and Corn Belt, Averages for
2000-2007 ..................................................14
Table 4. Soybean Area, Yield, and Production, U.S. and Corn Belt, Averages
for 2000-2007...............................................15



Midwest Floods of 2008:
Potential Impact on Agriculture
Background
The United States plays a critical role in global markets for both feed grains and
oilseeds. The United States is the world’s leading producer and exporter of both corn
and soybeans. In 2007 the United States had 42% and 63% shares, respectively, of
world corn production and trade, and 32% and 41% shares of world soybean
production and trade. As a result of this dominant role, unexpected changes in U.S.
production for either corn or soybeans, such as those stemming from the Midwest
floods of 2008, can have a major impact on both U.S. and global commodity markets.
During the first half of 2008, U.S. and world agricultural markets for most
grains and oilseeds experienced tight supplies and record high prices.1 The high
prices provided a tantalizing incentive for U.S. farmers as they prepared to plant their
crops this past spring. In contrast, the dramatic, unexpectedly sharp price increases
of the past year have raised costs for livestock feeders and agricultural processors,
evoked considerable concern about consumer food-price inflation and international
food aid availability, and sparked a global debate — referred to as the “food versus
fuel” debate — about the increasing policy trend of dedicating commercial
agricultural crops to biofuels production, particularly corn used for ethanol.
Against this backdrop of producer anticipation and consumer angst, substantial
new concerns emerged by late June about potential weather- and flood-related
production losses to this year’s U.S. corn and soybean crops. Widespread, good
growing conditions have persisted since the floods adding to the uncertainty over
crop production prospects.
U.S. Corn Belt. The Corn Belt is a 13-state region located in the Midwest
where corn is the predominant cash crop (Figure 1). It stretches from Ohio through
Indiana, Illinois, Iowa, northern Missouri, southern Wisconsin, and Minnesota to the
eastern fringe of the Great Plains states of North and South Dakota, Nebraska, and
Kansas. The Corn Belt also includes parts of Michigan and Kentucky. Since 2000,
these 13 states have accounted for 89% of U.S. corn production (Table 3). Iowa and
Illinois, in the heart of the Corn Belt, are the two leading corn-producing states with
a combined production share of 36%. Similarly, 88% of U.S. soybean production
occurs in the 13 Corn Belt states, with Iowa and Illinois again the two leading
producers with a combined share of 32% (Table 4).


1 For more information, see CRS Report RL34474, High Agricultural Commodity Prices:
What Are the Issues?, by Randy Schnepf.

Figure 1. Corn Belt


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 2008.2 According to USDA's forecast, U.S. farmers will
produce the second largest corn crop on record — 12.3 billion bushels — up 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 outlook — largely 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's August crop production forecast appear to have calmed much of the
market concern regarding crop losses due to flooding. However, a large portion of
the 2008 corn and soybean crops were planted late and, as of early August, remain
substantially behind historical development rates.3 As of August 11, USDA
estimates that 30% of corn had reached the dough stage of development compared
with the 5-year average of 50%, while only 6% had dented compared with an average
of 16% the past five years. Similarly, 60% of soybean plants had set pods compared
with the 5-year average of 75%. As a result, market analysts suggest that weather
problems could still emerge — such as an early freeze — that could lower yield and
2 Crop Production, National Agricultural Statistics Service (NASS), USDA, August 12,

2008; [http://www.nass.usda.gov/Publications/].


3 Crop Progress, NASS, USDA, August 11, 2008.

production prospects, especially in the more northerly regions where crop
development remains behind normal.
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. The yield estimates are based on objective field surveys
while the planted and harvested acreage estimates are usually drawn from the June
Acreage report.4 However, most of the survey data for the Acreage report was
collected during the first two weeks of June prior to the worst flooding. In response
to the changed circumstances, USDA conducted an extensive re-interview of
producers’ harvesting intentions in mid-July, in the flood-affected areas of Illinois,
Indiana, Iowa, Minnesota, Missouri, and Wisconsin, to supplement the earlier survey5
data in deriving estimates of abandoned and harvested acres. USDA stated that
under a return to normal weather conditions, by mid-July most flooded fields would
be dry and affected farmers would be better able to assess their options. Data
obtained from the mid-July re-interviews were incorporated into USDA’s August 12,

2008, Crop Production and WASDE reports.


Outlook for Corn Harvested Acres. USDA estimates 2008 U.S. planted
and harvested corn area of 86.977 and 79.290 million acres, respectively.6 This
compares with the June Acreage estimates of 87.327 million and 78.940 million
acres (Table 1). Thus, planted corn acreage has been revised downward 350,000
acres, while harvested acreage was raised by 350,000 acres. Planted area losses
occurred primarily in the flood-affected states. Harvested area gains occurred
primarily in states outside of the flood regions and is reflected in below-average
abandonment rates. High market prices appear to be encouraging farmers to make
every effort to harvest more marginal areas that are traditionally abandoned or grazed
off by livestock.
Outlook for Soybean Harvested Acres. USDA estimates 2008 U.S.
planted and harvested soybean area of 74.783 million and 73.341 million acres,
respectively.7 This compares with the June Acreage estimates of 74.533 and 72.121
million acres (Table 2). Thus, planted soybean acreage has been revised upward
250,000 acres, while harvested acreage was raised by 1,220,000 acres. In contrast
to corn, soybean harvested area gains occurred primarily in the flood-affected states.
Outlook for Corn Yield. USDA's August estimate of 2008 corn yields was
155 bushels per acre. If realized, this would be the second largest on record behind
the 160.4 bushels per acre achieved in 2004. Clearly, excellent weather since late
June has boosted the yield outlook. Just a month earlier, in July, USDA had forecast
national average corn yields at 148.4 bu./ac. due to the combined effects of slow


4 Acreage, NASS, USDA, June 30, 2008.
5 “USDA Report Assesses 2008 Corn and Soybean Acreage,” USDA News Release, June

30, 2008; at [http://www.nass.usda.gov/Newsroom/2008/06_30_2008.asp].


6 Crop Production, NASS, USDA, August 12, 2008.
7 Ibid.

planting progress, unusually slow plant emergence, and the flooding.8 Final yields
may still vary based on growing conditions through the remainder of the growing
season. USDA updates its crop production and market supply and demand estimates
monthly.9
Outlook for Soybean Yield. USDA's August estimate of 2008 soybean
yields was 40.5 bushels per acre. If realized, this would be down nearly 2% from last
year's 41.2 and the lowest since 2003. The soybean crop's late development and
dryness throughout much of the Southeast, Delta, and Northern Plains appears to be
taking its toll. Just a month earlier, in July, USDA had forecast national average
soybean yields at 41.6 bu./ac. based on 1989-2007 regional trend analysis adjusted
for late planting and emergence.10 As with corn, final soybean yields may still vary
based on growing conditions through the remainder of the growing season.
Estimating Crop Losses for 2008
Flood-related crop damage assessments generally are made by county and state
officials in the affected regions. However, a rough approximation of flood-damaged
acres can be obtained by comparing the implied state-level abandonment rates from
USDA's August forecasts with the recent eight-year average abandonment rates. If
one attributes any change from the 8-year average entirely to the flood, then the data
suggest that about 889,000 acres planted to corn and intended for harvest were lost
in Iowa (453,000), Illinois (236,000), Indiana (102,000), and Missouri (99,000) —
see Table 1. This "lost" area estimate represents about 1% of the 87.0 million acres
planted to corn in 2008. However, projected below-average abandonment rates
throughout the remainder of the Corn Belt, particularly in Nebraska, Kansas, South
Dakota, Ohio, and in lower-yielding non-Corn Belt states more than offset the lost
acres. Applying USDA August yield forecasts to the area-loss calculations suggests
that the four major flood-affected states of Iowa (77.5 million bushels), Illinois
(40.6), Indiana (15.8), and Missouri (14.4), cumulatively account for 148.2 million
bushels of "potentially" lost production.11 This "lost" production estimate represents

1.2% of the 12.3 billion bushel crop estimate announced by USDA.


Applying the same abandonment rate methodology to soybeans suggests that
projected area loss related to bad weather and flooding amounts to nearly 400,000
acres in the Corn Belt, partially offset by 184,000 acres of below-normal
abandonment in non-Corn Belt states (Table 2). This "lost" area estimate represents
about 0.2% of the 74.8 million acres planted to soybeans in 2008. Applying USDA


8 World Agricultural Supply and Demand Estimates (WASDE), World Agricultural Outlook
Board (WAOB), USDA, July 11, 2008.
9 USDA Crop Production reports are available at [http://www.nass.usda.gov/]; World
Agricultural Supply and Demand Estimates (WASDE), at [http://www.usda.gov/oce/
commodity/wasde/index.htm] .
10 World Agricultural Supply and Demand Estimates (WASDE), World Agricultural Outlook
Board (WAOB), USDA, July 11, 2008.
11 Note that these calculations by CRS are purely hypothetical. They are available upon
request.

August yield forecasts to the area-loss calculations suggests that for soybeans there
are six major flood-affected states that cumulatively account for 63 million bushels
of "potentially" lost soybean production: Iowa (19.1 million bushels), Illinois (19.0),
Indiana (12.5), Missouri (8.8) Wisconsin (2.4), and Minnesota (1.3).12 This "lost"
production estimate represents 2.1% of the estimated 3 billion bushel crop.
Unusual Spring Weather Across the U.S. Corn Belt
Wet, Cool Weather Persists Since Late 2007. The 2008 Midwest
weather-related crop problems — the late planting start, slow crop development, and
severe June flooding — were precipitated in 2007 by above-normal rainfall and a
cold, wet winter that saturated soils. In Iowa, 2007 was the fourth-wettest year on
record.13 The unusually cool, wet conditions persisted through spring 2008. Again
citing Iowa, which was subsequently hit the hardest by June floods (Figure 2), as an
example, the first six months of 2008 represented the wettest January-to-June period
on record. Cool weather inhibited evaporation rates, thus slowing the soil’s rate of
drying. As a result, many regions of the Corn Belt were saturated and vulnerable to
erosion, ponding (standing water), and flooding when heavy storms in late May and
early June dropped additional rainfall.
Planting Date Is Critical for Optimal Yields. Traditionally, farmers plant
corn as early as possible because early planting provides the greatest potential to14
achieve maximum yields. Corn is usually planted ahead of soybeans. Early corn
planting is discouraged by wet or cold soils (below 50o F). As a result, more
southerly regions tend to have earlier optimal planting dates. In Iowa the optimal
corn planting dates are between April 20 and May 5. Yields begin to drop off as the
planting date is delayed. A significant yield reduction occurs when the planting date
is extended to late May or June. Similarly, the optimal soybean planting date in Iowa
is the last week of April for the southern two-thirds of the state, and the first week of
May for the northern third. Optimal planting dates in more northerly latitudes, such
as in Minnesota or Wisconsin, occur slightly later and have a smaller window for
delayed planting.
This year’s excessive rainfall coupled with unusually persistent cold ground
temperatures delayed both corn plantings and subsequent plant emergence across
much of the prime growing region of the Corn Belt. By May 11, only 51% of
intended corn area in the Corn Belt had been planted compared with the previous 5-
year average (2002-07) of 77%.15 Similarly, only 11% of intended soybean area had
been planted compared with the 5-year average of 29%. The late start pushed key


12 Note that these calculations by CRS are purely hypothetical
13 “Memorandum for Reporters and Editors,” Iowa Dept. of Agriculture and Land
Stewardship, July 1, 2008. Note that Iowa’s weather records date back to the early 1870s.
14 See Has the best time to plant corn changed? and Early planting of soybean is very
important, Integrated Crop Management (ICM), Iowa State University (ISU) Extension, at
[http://www.ipm.iastate.edu/ipm/icm/2006/3-13/corntime.html] and [http://www.ipm.iastate.
edu/ipm/icm/ 2007/4-2/earlyplant.html ].
15 Crop Progress, NASS, USDA, May 12, 2008.

plant development stages of the corn growth cycle into the hotter weeks of July and
August, when it is susceptible to heat stress and dryness, and later into the fall, when
the possibility of an early freeze can prematurely end ear or pod filling. In addition,
a late start to corn generally implies a late start to soybean production (whose
planting generally follows corn), with similar growth concerns.
Figure 2. Counties Designated as Presidential Disaster Areas


By May 27, 88% of intended corn acres had been planted versus the 5-year
average of 94%, and 52% of intended soybean acres versus 5-year average of 67%.
However, equally if not more critical were the on-going delays in plant emergence
for both crops. Only 52% of planted corn had emerged compared with a 5-year
average of 76% emergence, and only 12% of planted soybeans had emerged versus
the 5-year average of 34%. As a result, crop yield concerns were already developing
by late May.
June Flooding Ravages Key Growing Areas. With soils already
saturated and yield concerns mounting, widespread, heavy rains across the Corn Belt
in late May and early June washed out substantial areas recently planted to crops. In
addition, they produced severe erosion and gullying, and left saturated soils and
standing water in many fields. But most damagingly, the rains triggered widespread
flooding across the heart of the Corn Belt. Thousands of acres of prime cropland in
Iowa, Nebraska, Illinois, Indiana, Wisconsin, and Missouri were flooded by rivers
that swelled their banks and caused levees to break as the storm surge moved through
the Mississippi River watershed. Indiana’s agriculture director said that the June

floods had likely caused the worst agriculture disaster in the state’s history, damaging
nearly 10% of corn and soybean crops.16
The flooding likely led to the abandonment of substantial planted crop acreage,
and to yield losses in those crops that survived the flooding but were subject to
extended periods of standing water or waterlogged soil.17 A further concern of
saturated soils persisting during the early stages of plant development (particularly
for late-planted crops) is that corn plants are more likely to develop shallow root
systems, which, in turn, increase their vulnerability to heat and dryness later in the
growing cycle.
Initial attempts to ascertain the extent of the crop damage were difficult because
the eventual yield and production outcomes for the affected areas depends on how
quickly flood waters recede and whether plant growth resumes or new seed is
planted. For many farmers, by late June the replanting window for corn had already
closed or was approaching faster than the soils were drying. In many cases, the
indemnities offered under federally subsidized crop insurance represented greater
potential remuneration than incurring the costs of replanting subject to a substantial
reduction in yield coverage (due to the late planting date). Replanting to soybeans
was an option for some, but many farmers who initially planted corn had already
applied a round of herbicide, which would likely damage or kill the soybean seed.
Flood-Related Crop Production and Marketing Issues
Transportation Infrastructure Damage. While spring flooding in the
upper Midwest had caused problems for barge traffic earlier in the year, the extreme
rain in June stopped navigation on a nearly 300-mile stretch of the Mississippi18
River. Major parts of the rail network in the Midwest were damaged, and several
major highways in Iowa were temporarily closed. The transportation infrastructure
damage resulted in significant delays as grain shipments were rerouted and repairs
were underway. By July 6, the Mississippi River had re-opened to commercial traffic,
but substantial delays persisted. As a result, many shipments of corn and soybeans
were still being rerouted to Texas Gulf ports.
Agricultural Processing and Storage Facilities Disruptions. The
flood waters partially submerged many grain elevators and storage facilities, as well
as two ethanol plants in Iowa. However, the main damage to agricultural marketing
and processing facilities located in the flood-affected region was economic and


16 As cited in “Crop Development Issues, Food Prices and Ethanol Concerns,” posted by
Keith Good, FarmPolicy.com, June 20, 2008.
17 See Corn survival in flooded or saturated fields, and Planting and replanting scenarios,
ICM, ISU Extension, available at [http://www.ipm.iastate.edu/ipm/icm/2007/4-30/flooded.
html] and [http://www.ipm.iastate.edu/ipm/icm/2007/6-4/replant.html].
18 “Midwest Flooding Affects River, Rail, and Road Traffic,” Grain Transportation Report,
Agricultural Marketing Service, USDA, June 26, 2008. For more information about barge
transportation on the Mississippi River, see CRS Report RL32470, Upper Mississippi -
Illinois Waterway Navigation Expansion: An Agricultural Transportation and
Environmental Context, coordinated by Randy Schnepf.

primarily attributable to delays in the arrival of primary commodity shipments due
to the transportation infrastructure damage. Many grain elevators, ethanol plants,
soybean crushing plants, and other agricultural processing facilities were temporarily
closed or operating at reduced capacity in the weeks immediately following the
floods. The Iowa Renewable Fuels Association initially estimated that more than 300
million gallons (annualized) of ethanol production capacity were off line on
June 13.19 In addition, several grain elevators and other types of storage facilities
located within the flood zone were damaged. The number of grain elevators
damaged and the potential volume of corn and soybean stocks lost is not yet available
but is being evaluated by USDA.
Livestock Losses and Disposal Issues. The suddenness of the floods
across eastern Iowa resulted in the deaths of possibly thousands of head of livestock,
particularly hogs. However, preliminary assessments for the state of Iowa suggest
that the actual livestock mortality tally may be substantially lower than initially
feared.20 It appears that most producers had sufficient advance warning of potential
flood conditions to move their animals to a safer location ahead of the floods.
The Federal Response
Designated Disaster Areas. The President is authorized — by the Robert
T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act) — to
issue major disaster or emergency declarations in response to catastrophes that21
overwhelm state and local governments. Iowa, with 85 of its 99 counties declared
eligible for either individual or public a federal disaster area, appeared to be the22
hardest hit by the storms and flooding. However, counties in Indiana (44 counties),
Illinois (24), Minnesota (4), Wisconsin (30), Nebraska (53), as well as West Virginia
(18), were also identified as primary disaster areas related to the spring floods
(Figure 2).23


19 “Grain storage facilities take hit from flooding,” by Tim Hoskins, Minnesota Farm Guide,
July 3, 2008.
20 Conversation with staff at the Iowa Department of Agriculture and Land Stewardship.
Preliminary estimates suggest about 3,500 hogs and no cattle deaths are directly attributable
to the June floods.
21 For more information see CRS Report RL33053, Federal Stafford Act Disaster
Assistance: Presidential Declarations, Eligible Activities, and Funding, by Keith Bea; CRS
Report RL31734, Federal Disaster Recovery Programs: Brief Summaries, by Mary Jordan;
and CRS Report RL34146, FEMA’s Disaster Declaration Process: A Primer, by Francis X.
McCarthy.
22 The initial federal disaster declaration was made on May 27, 2008. The final county
count for Iowa is available as "Disaster Declaration as of 08/12/2008," FEMA-1763-DR,
Iowa, at [http://www.gismaps.fema.gov/2008graphics/dr1763/dec_1763.pdf].
23 "2008 Federal Disaster Declarations," Federal Emergency Management Agency (FEMA),
available at [http://www.fema.gov/news/disasters.fema]. For more information on federal
flood response see, "Midwest Flood Response and Recovery," at
[http://www.usa.gov/ flooding.shtml ].

A Presidential declaration results in the distribution of a wide range of federal
aid to individuals and families, certain nonprofit organizations, and public agencies
in the designated areas. Congress appropriates money to the Disaster Relief Fund
(DRF) for disaster assistance authorized by the Stafford Act, which is administered
by the Federal Emergency Management Agency (FEMA) within the Department of
Homeland Security (DHS). Appropriations to the DRF remain available until
expended. However, DRF funds are not available to cover agricultural production
losses. Instead, USDA offers several permanently authorized programs to help
farmers recover financially from a natural disaster, including federal crop insurance,
the non-insured assistance program (NAP), and emergency disaster loans.24
Agricultural Assistance. USDA is actively engaged in committing
resources to the flood response. 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.25
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). This funding is available for
eligible farmers to defray the cost of clean-up and rehabilitation of farmland and
watersheds following a disaster.26 Of the total amount available, $89.4 million is for
the Emergency Conservation Program, which assists farmers in the cleanup and
restoration of farmland damaged by a natural disaster, and $390.5 million is for the
Emergency Watershed Protection Program, which is designed to relieve imminent
hazards created by natural disasters and to alleviate future flood risk.
The 2008 farm bill (P.L. 110-246) included provisions that authorized and
funded a new four-year supplemental revenue crop disaster program (for crop years
2008-2011).27 However, without advance payments, no emergency supplemental
disaster assistance for 2008 crop and livestock losses will be available before October
2009. This is because — according to the farm bill disaster program’s design — the
payment formula used to determine the level of payments for 2008 crop and revenue
losses is based on national average market prices which will not be known until Fall

2009. USDA claims that it does not have the authority to make advance payments.


Some policymakers want to amend the farm bill to require USDA to make advance
payments, while several farm groups contend that USDA already has the flexibility
and should exercise its authority.


24 For more information, see CRS Report RS21212, Agricultural Disaster Assistance, by
Ralph M. Chite.
25 For a list of USDA flood-related activities, see “Midwest Flood Response USDA
Actions,” Release No. 0163.08, updated on July 1, 2008, at [http://www.usda.gov/safety].
26 For more information, see CRS Report RS21212, Agricultural Disaster Assistance, by
Ralph M. Chite.
27 For more information, see CRS Report RL34207, Crop Insurance and Disaster Assistance
in the 2008 Farm Bill, by Ralph M. Chite.

USDA has also been under considerable pressure from Members of Congress
and groups representing the livestock, biofuels, and agricultural processing sectors
to do more to bring high commodity prices down — corn and soybean products are
important ingredients for those industries. Among other things, these groups have
called for the Secretary of Agriculture to announce a penalty-free release of acreage
presently under long-term contract in the Conservation Reserve Program (CRP)28 and
for the EPA Administrator to announce a waiver of the Renewable Fuels Standard
which mandates an increasing minimum use of biofuels in the national fuel supply.29
On April 25, 2008, Texas Governor Rick Perry, in a letter to Stephen Johnson,
Administrator of the Environmental Protection Agency (EPA) — the federal agency
responsible for administering the RFS — to request that EPA waive 50% of the RFS’
ethanol requirements to alleviate their impact on corn prices.30 However, Governor
Perry's request was denied by the EPA.31
On May 27, USDA announced that 24 million acres of CRP land could be used
in 2008 for a critical feed use (CFU) program of managed haying and grazing
following primary bird nesting season.32 However, a U.S. District Court issued a
permanent injunction on July 24 against the CFU except for those who applied before
a temporary restraining order issued on July 8.33
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.34
Potential Market Implications Due to Flood Losses
As mentioned earlier, the United States and world markets have experienced
tight supplies and record high prices during the first half of 2008.35 Most long-term


28 For more information, see CRS Report RS21613, Conservation Reserve Program: Status
and Current Issues, by Tadlock Cowan.
29 For more information, see CRS Report RL34265, Selected Issues Related to an Expansion
of the Renewable Fuel Standard (RFS), by Brent D. Yacobucci and Tom Capehart.
30 “Letter to EPA Administrator Stephen Johnson,” by Texas Governor Perry, April 25,

2008, at [http://www.governor.state.tx.us/].


31 "EPA Keeps Biofuels Levels in Place after Considering Texas’ Request," EPA News
Release, August 7, 2008.
32 "USDA Announces Crp Permitted Use for Livestock Feed Needs," USDA News Release
No. 0137.08, May 27, 2008.
33 For more information, see CRS Report RS21613, Conservation Reserve Program: Status
and Current Issues, by Tadlock Cowan.
34 “USDA Releases CRP Land in Flood Regions for Grazing,” Release No. 0179.08, July 7,

2008.


35 For more information, see CRS Report RL34474, High Agricultural Commodity Prices:
(continued...)

forecasts project prices for feed grains and oilseeds — as well as those crops that
compete for area with feed grains and oilseeds — to remain at significantly higher
levels than experienced during the recent 1998-2006 period.36 The main factors
behind higher long-term prices are projections for a steady rise in global population,
accompanied by steady income growth in the world’s developing economies, which
combine to sustain growth in demand for livestock products and the feedstuffs (e.g.,
coarse grains and protein meals) needed to produce those products. In addition, the
outlook for increased demand for agricultural feedstocks to meet large increases in
government biofuel-usage policies, particularly in the United States and the European
Union (EU), suggest that demand will increase strongly over the coming decade for
corn (the primary feedstock for U.S. ethanol production), and vegetable oils (the
primary feedstock for biodiesel production in the United States and the EU).
These long-run forecasts assume normal crop growing conditions and successful
harvests. As a result, any deviation from normal growing conditions can be expected
to have negative market repercussions and drive prices higher. 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. Because the United States plays a dominant role in global
corn and soybean markets, U.S. price changes transmit directly to the international
marketplace.
In summary, good growing conditions during July and early August of 2008
appear to have moderated initial concerns over potential flood-related crop losses.
However, a large portion of the 2008 corn and soybean crops were planted late and,
as of early August, remain substantially behind historical development rates. As a
result, market analysts suggest that weather problems such as an early freeze could
still emerge to lower yield and production prospects. 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.


35 (...continued)
What Are the Issues?, by Randy Schnepf.
36 For examples of long-term agricultural forecasts, see U.S. Baseline Briefing Book, Food
and Agricultural Policy Research Institute, FAPRI-MU Report #03-08, March 2008, at
[ h t t p : / / www.f a p r i . mi s s o u r i . e d u / o u t r each/publications/ 2008/FAPRI_MU_Report_03_08.pdf].
See also “Agricultural Baseline Projections,” Economic Research Service, USDA, at
[ h t t p : / / www.e r s .us da .gov/ Br i e f i n g/ Ba s e l i n e / ] .

Table 1. Estimated Corn Acres Lost Due to June 2008 Floods Based on Predicted
Abandonment Rates
MarchaJunebAugust 12, 2008cAbandonment
August
Implied dHa r v- Ha r v- J une Aug. Ave :
StateArea LossPlantedPlantedestedPlantedested200820082000-07
--------------- 1,000 acres -------------------- Percent -----1,000 acres
Io wa 13,200 13,700 12,280 13,700 12,900 6.6% 5.8% 2.5% (453)
Illinois 12,600 12,300 11,500 12,200 11,800 6.5% 3.3% 1.3% (236)
Nebraska 8,800 9,000 8,750 9,000 8,750 2.8% 2.8% 5.0% 198
Minnesota 7,600 7,800 7,250 7,800 7,250 7.1% 7.1% 7.0% (0)
Indiana 5,700 5,700 5,350 5,600 5,350 6.1% 4.5% 2.6% (102)
Ohio 4,650 4,650 4,200 4,650 4,200 9.7% 9.7% 15.3% 260
iki/CRS-RL34583South Dakota3,9004,1003,9004,1003,9004.9%4.9%10.0%209
g/wK a nsas 3,650 3,800 3,100 3,750 2,950 18.4% 21.3% 22.9% 57
s.or
leakWisconsin 3,350 3,350 3,150 3,350 3,150 6.0% 6.0% 6.8% 28
Missouri 3,100 2,900 2,500 2,800 2,600 13.8% 7.1% 3.6% (99)
://wikiMichigan 2,250 2,400 2,150 2,400 2,150 10.4% 10.4% 18.1% 185
httpK e ntucky 2,350 2,350 2,080 2,350 2,080 11.5% 11.5% 11.4% (1)
North Dakota1,2301,2301,1501,2301,1506.5%6.5%7.0%6
Corn Belt72,38073,28067,88072,93068,2306.6%5.7%3.4%(45)
Non-Corn Belt13,63414,04711,06014,04711,06021.3%21.3%25.3%569
United States86,01487,32778,94086,97713,7009.6%8.8%9.3%369
Source: NASS, USDA.
a. Prospective Plantings, NASS, USDA, March 31, 2008.
b. Acreage, NASS, USDA, June 30.
c. Crop Production, NASS, USDA, August 12, 2008.
d. Calculations are by CRS based on departure from average abandonment rates.



Table 2. Estimated Soybean Acres Lost Due to June 2008 Floods Based on Predicted
Abandonment Rates
MarchaJunebAugust 12, 2008cAbandonment
August
Implied dHa r v- Ha r v- J une Aug. Ave :
StateArea LossPlantedPlantedestedPlantedested200820082000-07
--------------- 1,000 acres -------------------- Percent -----1,000 acres
Iowa 9,800 9,4008,950 9,5009,3002.1%4.8%0.5%(156)
Illinois 8,800 9,100 8,600 9,100 8,950 1.6% 5.5% 0.5% (102)
Minnesota 7,100 7,100 6,950 7,100 6,950 2.1% 2.1% 1.7% (32)
Indiana 5,500 5,500 5,200 5,600 5,550 0.9% 5.5% 0.5% (21)
Missouri 5,200 5,300 5,000 5,300 5,100 3.8% 5.7% 1.2% (137)
iki/CRS-RL34583Nebraska 5,000 4,750 4,700 4,750 4,700 1.1% 1.1% 1.2% 8
g/wOhio 4,500 4,600 4,580 4,600 4,580 0.4% 0.4% 0.5% 3
s.orSouth Dakota4,1004,1004,0404,1004,0401.5%1.5%1.4%(1)
leakNorth Dakota3,5503,4003,3403,4003,3401.8%1.8%2.3%20
K a nsas 3,200 3,200 3,100 3,200 3,100 3.1% 3.1% 5.1% 64
://wikiMichigan 2,000 1,900 1,890 1,900 1,890 0.5% 0.5% 0.7% 3
httpWisconsin 1,650 1,650 1,560 1,700 1,630 4.1% 5.5% 2.1% (35)
K e ntucky 1,330 1,330 1,320 1,330 1,320 0.8% 0.8% 1.2% 6
Corn Belt61,73061,33059,23061,58060,4501.8%3.4%1.2%(411)
Non-Corn Belt13,06313,20312,89113,20312,8912.4%2.4%3.8%184
United States74,79374,53372,12174,78373,3411.9%3.2%1.6%(271)
Source: NASS, USDA.
a. Prospective Plantings, NASS, USDA, March 31, 2008.
b. Acreage, NASS, USDA, June 30.
c. Crop Production, NASS, USDA, August 12, 2008.
d. Calculations are by CRS based on departure from average abandonment rates.



Table 3. Corn Area, Yield, and Production, U.S. and Corn Belt,
Averages for 2000-2007
Maj o ra Co r n
Crops Acreage
Total Ave.Aband-
PlantedProd-FarmValue ofHarv-onment
State Ar e a Yield uc tio n Price Productio nPlanted ested rate
1,000 acres1,000 acres%bu./ac.Millionbu.$/bu.$ Million
Iowa 24,658 12,600 12,281 2.5 162.6 2 ,002 2.40 4,906
Illinois 23,337 11,606 11,450 1.3 157.9 1 ,812 2.51 4,656
Nebraska 18,927 8,419 8,000 5.0 147.4 1 ,182 2.44 2,942
Minneso ta 19,764 7,363 6,844 7.0 152.3 1 ,043 2.33 2,461
Indiana 12,340 5,763 5,610 2.6 150.4 845 2.50 2,138
Ohio 10,201 3,413 3,180 6.8 142.5 454 2.49 1,142
South Dakota17,1034,4443,76515.3111.84252.27975
Kansas 23,045 3,381 3,044 10.0 129.1 395 2.54 1,016
Wisconsin 8 ,039 3,675 2,835 22.9 135.6 385 2.43 949
Misso uri 13,856 2,931 2,825 3.6 130.3 369 2.47 921
Michigan 6,525 2,275 2,015 11.4 127.8 257 2.44 638
Kentucky 5,575 1,236 1,150 7.0 134.0 154 2.62 406
North Dakota21,5781,5111,23818.1114.31422.28355
Corn Belt204,94668,61664,2366.4147.09,4672.4423,506
Non-Corn Belt117,84412,3079,19133.6126.11,1592.753,182
United States322,79080,92373,42810.2144.410,6252.4626,688
Source: National Agricultural Statistics Service, USDA, Online Agricultural Statistics Database, July 9, 2008.
Note: States are ranked by average production for the six-year period.
a. USDA defines major crops as barley, corn, cotton, millet, oats, peanuts, rapeseed, sunflower, rice, rye, sorghum,
and wheat.



Table 4. Soybean Area, Yield, and Production, U.S. and Corn Belt,
Averages for 2000-2007
Soyb eans
Maj o ra
Crops Acreage
Total Ab a n d -
PlantedProd-Value ofHarv-onment
Ar e aState Yield uc tio n P r ice Productio nPlanted ested rate
1,000 acres1,000 acres%bu./ac.Millionbu.$/bu.$ Million
Iowa 24,658 10,213 10,165 1.4 46.4 470 6.36 2,937
I llino is 2 3 , 3 3 7 9 , 9 8 1 9 , 9 2 9 0 . 3 4 4 . 6 4 4 2 6 . 4 5 2 , 7 7 7
Minneso ta 19,764 7,138 7,019 0.8 39.6 277 6.15 1,681
Indiana 12,340 5,463 5,434 0.9 46.3 252 6.34 1,558
Nebraska 18,927 4,650 4,593 1.5 44.9 206 6.02 1,234
Ohio 10,201 4,481 4,459 1.3 42.4 189 6.24 1,181
Misso uri 13,856 4,981 4,923 1.1 36.7 181 6.27 1,119
South Dakota17,1034,0754,0160.833.81355.94791
North Dakota21,5782,9402,8710.831.6905.89545
Kansas 23,045 2,825 2,680 0.5 30.1 8 2 6 .21 505
Michigan 6,525 2,000 1,983 5.9 36.6 7 2 6 .19 445
Wisconsin 8 ,039 1,578 1,545 23.0 38.8 6 0 6 .04 355
Kentucky 5,575 1,253 1,238 1.1 39.1 4 9 6 .43 303
Corn Belt204,94661,57660,8571.241.22,5036.2415,403
Non-Corn Belt117,84411,18510,7673.932.43496.162,153
United States322,79072,76371,6231.639.82,8526.2517,584
Source: National Agricultural Statistics Service, USDA, Online Agricultural Statistics Database, July 9, 2008.
Note: States are ranked by average production for the six-year period.
a. USDA defines major crops as barley, corn, cotton, millet, oats, peanuts, rapeseed, sunflower, rice, rye, sorghum,
and wheat.