Midwest Floods of 2008: Potential Impact on Agriculture

Congressional research reportAug 18, 2008

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Midwest Floods of 2008: Potential Impact on

Agriculture

-name redactedSpecialist in Agricultural Policy

August 18, 2008

Congressional Research Service

7-....

www.crs.gov

RL34583

CRS Report for Congress

Prepared for Members and Committees of Congress

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.

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Midwest Floods of 2008: Potential Impact on Agriculture

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

Figures

Figure 1. Corn Belt .....................................................................................................................2

Figure 2. Counties Designated as Presidential Disaster Areas ......................................................6

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 20002007 ...................................................................................................................................... 15

Contacts

Author Contact Information ...................................................................................................... 15

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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).

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

(name redacted).

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Midwest Floods of 2008: Potential Impact on Agriculture

Figure 1. Corn Belt

Source: CRS based on USDA crop production data.

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 production

Crop Production, National Agricultural Statistics Service (NASS), USDA, August 12, 2008;

http://www.nass.usda.gov/Publications/.

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

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Midwest Floods of 2008: Potential Impact on Agriculture

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 survey data in deriving estimates of abandoned and

harvested acres.5 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,

Acreage, NASS, USDA, June 30, 2008.

“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.

Crop Production, NASS, USDA, August 12, 2008.

Ibid.

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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 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 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),

World Agricultural Supply and Demand Estimates (WASDE), World Agricultural Outlook Board (WAOB), USDA,

July 11, 2008.

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.

World Agricultural Supply and Demand Estimates (WASDE), World Agricultural Outlook Board (WAOB), USDA,

July 11, 2008.

Note that these calculations by CRS are purely hypothetical. They are available upon request.

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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 to achieve maximum yields.14 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 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.

Note that these calculations by CRS are purely hypothetical

“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.

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.

Crop Progress, NASS, USDA, May 12, 2008.

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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

As cited in “Crop Development Issues, Food Prices and Ethanol Concerns,” posted by Keith Good, FarmPolicy.com,

June 20, 2008.

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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 Mississippi

River. 18 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 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

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.

“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, CRS Report

RL32470, Upper Mississippi River - Illinois Waterway Navigation Expansion: An Agricultural Transportation and

Environmental Context, by (name redacted) et al.

“Grain storage facilities take hit from flooding,” by Tim Hoskins, Minnesota Farm Guide, July 3, 2008.

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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 that overwhelm state and local governments.21 Iowa, with 85 of its 99 counties

declared eligible for either individual or public a federal disaster area, appeared to be the hardest

hit by the storms and flooding. 22 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

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

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.

For more information see CRS Report RL33053, Federal Stafford Act Disaster Assistance: Presidential

Declarations, Eligible Activities, and Funding, by (name redacted); CRS Report RL31734,

Federal Disaster Recovery

Programs: Brief Summaries, by (name redacted); and CRS Report RL34146, FEMA’s Disaster Declaration

Process: A Primer, by (name redacted).

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.

“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.

For more information, see CRS Report RS21212, Agricultural Disaster Assistance, by (name redacted).

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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.

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

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.

For more information, see CRS Report RS21212, Agricultural Disaster Assistance, by (name redacted).

For more information, see CRS Report RL34207, Crop Insurance and Disaster Assistance in the 2008 Farm Bill, by

(name redacted) and (name redacted).

For more information, see CRS Report RS21613, Conservation Reserve Program: Status and Current Issues, by

(name redacted).

For more information, see CRS Report RL34265, Selected Issues Related to an Expansion of the Renewable Fuel

Standard (RFS), by (name redacted) and Tom Capehart.

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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 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

“Letter to EPA Administrator Stephen Johnson,” by Texas Governor Perry, April 25, 2008, at

http://www.governor.state.tx.us/.

“EPA Keeps Biofuels Levels in Place after Considering Texas’ Request,” EPA News Release, August 7, 2008.

“USDA Announces Crp Permitted Use for Livestock Feed Needs,” USDA News Release No. 0137.08, May 27,

2008.

For more information, CRS Report RS21613, Conservation Reserve Program: Status and Current Issues, by (name re

dacted).

“USDA Releases CRP Land in Flood Regions for Grazing,” Release No. 0179.08, July 7, 2008.

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

(name redacted).

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 http://www.fapri.missouri.edu/outreach/publications/

2008/FAPRI_MU_Report_03_08.pdf. See also “Agricultural Baseline Projections,” Economic Research Service,

USDA, at http://www.ers.usda.gov/Briefing/Baseline/.

Congressional Research Service

Midwest Floods of 2008: Potential Impact on Agriculture

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.

Congressional Research Service

Table 1. Estimated Corn Acres Lost Due to June 2008 Floods Based on Predicted Abandonment Rates

Marcha

State

Juneb

Planted

August 12, 2008c

Harvested

Planted

Harvested

Abandonment

June 2008

--------------- 1,000 acres ---------------

Aug. 2008

Ave:

2000-07

----- Percent -----

August

Implied

Area Lossd

1,000 acres

Iowa

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%

5.0%

198

Minnesota

7,600

7,800

7,250

7,800

7,250

7.1%

7.0%

-0

Indiana

5,700

5,350

5,600

5,350

6.1%

4.5%

2.6%

-102

Ohio

4,650

4,200

4,650

4,200

9.7%

15.3%

260

South Dakota

3,900

4,100

3,900

4,100

3,900

4.9%

10.0%

209

Kansas

3,650

3,800

3,100

3,750

2,950

18.4%

21.3%

22.9%

Wisconsin

3,350

3,150

3,350

3,150

6.0%

6.8%

Missouri

3,100

2,900

2,500

2,800

2,600

13.8%

7.1%

3.6%

-99

Michigan

2,250

2,400

2,150

2,400

2,150

10.4%

18.1%

185

Kentucky

2,350

2,080

2,350

2,080

11.5%

11.4%

-1

North Dakota

1,230

1,150

1,230

1,150

6.5%

7.0%

Corn Belt

72,380

73,280

67,880

72,930

68,230

6.6%

5.7%

3.4%

-45

Non-Corn Belt

13,634

14,047

11,060

14,047

11,060

21.3%

25.3%

569

United States

86,014

87,327

78,940

86,977

13,700

9.6%

8.8%

9.3%

369

Source: NASS, USDA.

Prospective Plantings, NASS, USDA, March 31, 2008.

Acreage, NASS, USDA, June 30.

Crop Production, NASS, USDA, August 12, 2008.

Calculations are by CRS based on departure from average abandonment rates.

CRS-12

Table 2. Estimated Soybean Acres Lost Due to June 2008 Floods Based on Predicted Abandonment Rates

Marcha

State

Juneb

Planted

August 12, 2008c

Harvested

Planted

Harvested

Abandonment

June 2008

--------------- 1,000 acres ---------------

Aug. 2008

Ave:

2000-07

----- Percent -----

August

Implied

Area Lossd

1,000 acres

Iowa

9,800

9,400

8,950

9,500

9,300

2.1%

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

6,950

7,100

6,950

2.1%

1.7%

-32

Indiana

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

Nebraska

5,000

4,750

4,700

4,750

4,700

1.1%

1.2%

Ohio

4,500

4,600

4,580

4,600

4,580

0.4%

0.5%

South Dakota

4,100

4,040

4,100

4,040

1.5%

1.4%

-1

North Dakota

3,550

3,400

3,340

3,400

3,340

1.8%

2.3%

Kansas

3,200

3,100

3,200

3,100

3.1%

5.1%

Michigan

2,000

1,900

1,890

1,900

1,890

0.5%

0.7%

Wisconsin

1,650

1,560

1,700

1,630

4.1%

5.5%

2.1%

-35

Kentucky

1,330

1,320

1,330

1,320

0.8%

1.2%

Corn Belt

61,730

61,330

59,230

61,580

60,450

1.8%

3.4%

1.2%

-411

Non-Corn Belt

13,063

13,203

12,891

13,203

12,891

2.4%

3.8%

184

United States

74,793

74,533

72,121

74,783

73,341

1.9%

3.2%

1.6%

-271

Source: NASS, USDA.

Prospective Plantings, NASS, USDA, March 31, 2008.

Acreage, NASS, USDA, June 30.

Crop Production, NASS, USDA, August 12, 2008.

Calculations are by CRS based on departure from average abandonment rates.

CRS-13

Midwest Floods of 2008: Potential Impact on Agriculture

Table 3. Corn Area,Yield, and Production, U.S. and Corn Belt,

Averages for 2000-2007

State

Major

Cropsa

Total

Planted

Area

Corn

Acreage

Planted

1,000

acres

1,000

acres

Iowa

24,658

12,600

Illinois

23,337

Nebraska

AbandonHarvested ment rate

Yield

Production

Ave. Farm Value of

Price Production

bu./ac.

Million

bu.

$/bu.

$ Million

12,281

2.5

162.6

2,002

2.40

4,906

11,606

11,450

1.3

157.9

1,812

2.51

4,656

18,927

8,419

8,000

5.0

147.4

1,182

2.44

2,942

Minnesota

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 Dakota

17,103

4,444

3,765

15.3

111.8

425

2.27

975

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

Missouri

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 Dakota

21,578

1,511

1,238

18.1

114.3

142

2.28

355

Corn Belt

204,946

68,616

64,236

6.4

147.0

9,467

2.44

23,506

Non-Corn Belt 117,844

12,307

9,191

33.6

126.1

1,159

2.75

3,182

United States

80,923

73,428

10.2

144.4

10,625

2.46

26,688

322,790

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.

USDA defines major crops as barley, corn, cotton, millet, oats, peanuts, rapeseed, sunflower, rice, rye,

sorghum, and wheat.

Congressional Research Service

Midwest Floods of 2008: Potential Impact on Agriculture

Table 4. Soybean Area,Yield, and Production, U.S. and Corn Belt,

Averages for 2000-2007

State

Major

Cropsa

Total

Planted

Area

Soybeans

Acreage

Yield

Production

Price

Value of

Production

bu./ac.

Million

bu.

$/bu.

$ Million

AbandonPlanted Harvested ment rate

1,000

acres

1,000 acres

Iowa

24,658

10,213

10,165

1.4

46.4

470

6.36

2,937

Illinois

23,337

9,981

9,929

0.3

44.6

442

6.45

2,777

Minnesota

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

Missouri

13,856

4,981

4,923

1.1

36.7

181

6.27

1,119

South Dakota

17,103

4,075

4,016

0.8

33.8

135

5.94

791

North Dakota

21,578

2,940

2,871

0.8

31.6

5.89

545

Kansas

23,045

2,825

2,680

0.5

30.1

6.21

505

Michigan

6,525

2,000

1,983

5.9

36.6

6.19

445

Wisconsin

8,039

1,578

1,545

23.0

38.8

6.04

355

Kentucky

5,575

1,253

1,238

1.1

39.1

6.43

303

Corn Belt

204,946

61,576

60,857

1.2

41.2

2,503

6.24

15,403

Non-Corn Belt 117,844

11,185

10,767

3.9

32.4

349

6.16

2,153

United States

72,763

71,623

1.6

39.8

2,852

6.25

17,584

322,790

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.

USDA defines major crops as barley, corn, cotton, millet, oats, peanuts, rapeseed, sunflower, rice, rye,

sorghum, and wheat.

Author Contact Information

(name redacted)

Specialist in Agricultural Policy

#redacted#@crs.loc.gov, 7-....

Congressional Research Service

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