Grain Harvest Expected to Fall 24% From 1987 : Report Warns Low Supply Could Drive Food Prices Higher Than Projected

The Agriculture Department forecast Tuesday that this summer’s relentless drought will slash the nation’s grain production this year by a staggering 24% from 1987 levels and could wreak even more damage if the hot, dry weather persists.

The report, based on preliminary surveys by the department before July 1 and on assumptions of near-normal weather since then, was decidedly less bearish than estimates by private analysts and state officials, who have been predicting that 30% to 45% of the projected harvest would be lost. In the nearly two weeks since the information was compiled, conditions have continued to deteriorate across a broad area of the Midwestern Corn Belt.

Norton Strommen, the Agriculture Department’s chief weather forecaster, said his agency plans to issue a new 30-day forecast today predicting that rainfall would increase to “near normal” throughout the eastern Corn Belt during the next six to 10 days--a development that, if it materializes, would come just in time for the plants to complete the pollination process needed to produce corn. But he added that the outlook for the rest of the four-week period is unclear.

Despite such uncertainties, USDA officials insisted that under current projections, farmers will be able both to meet domestic demand for crops such as corn, soybeans, wheat and sorghum and to export what foreign customers expect for the coming year.

Impact on Foods Will Vary

But Ewen Wilson, the department’s chief economist, said the shortfall would leave existing stocks of grains at historically low levels and probably would spur food prices more sharply than previously had been expected.

Wilson said that based on the new information, the department now expects the rise in food prices to be 3% to 5% rather than the 2% to 4% it had projected a month ago.

He said the impact would vary widely among different kinds of food, however. For example, meat prices are expected to fall sharply this summer and autumn because cattle producers who are unable to buy feed cheaply are selling off their animals early, glutting the market.

The reports came as, separately, Congress and the Reagan Administration began work on an emergency farm bill designed to provide $5.5 billion in relief to farmers whose crops have been damaged by the drought so that they will be able to resume production next year.

President Reagan called a Cabinet meeting to endorse the bipartisan legislation, which has been worked out jointly by congressional and Administration representatives. The House and Senate agriculture committees began formal consideration of the measure Tuesday, with hopes of passing it in both houses by the end of this week. No major opposition is expected.

The legislation, details of which were made public Tuesday, would reimburse farmers for 65% of the return they had expected on losses that exceed 35% of their normal crop. It would provide special disaster-relief payments of up to $100,000 for each farmer for crop losses stemming from the drought and would excuse farmers who receive price-support loans on grains and other crops from having to repay them in cases where crops are ruined.

No Export Restrictions

It also would underwrite losses for owners of livestock herds and poultry farms, including for the first time those livestock producers who do not grow their own feed. The measure is expected to be financed from savings in federal farm subsidy programs. The rationale is that grain prices are being pushed so high because of the drought that the government won’t have to pay as much in subsidies as it would if it had to prop up those prices.

Agriculture Secretary Richard Lyng also repeated earlier assurances that the Administration has no intention of restricting exports, as the Carter and Nixon administrations did when food supplies were short. “We want our export buyers to know that we continue to be reliable suppliers,” Lyng said.

Tuesday’s crop report projected total U.S. grain production at 212 million metric tons this year, down 24% from 1987, leaving the nation’s total grain supplies--including existing stocks--at 388 million metric tons, or 20% below their levels of a year ago.

The corn harvest was projected at 5.2 billion bushels, down 29% from June’s forecast and 26% below last year’s levels. Combined with existing stocks of corn, it would push total supplies to 9.6 billion bushels.

Wheat output is expected to total 1.84 billion bushels, down 13% from what had been forecast before the drought and 13% from 1987 levels as well. The winter wheat crop, already harvested, virtually escaped serious damage. With the 1988 crop added, wheat supplies would total 3.1 billion bushels.

The report estimated that the nation’s soybean yield at 1.65 billion bushels, down 12% from the pre-drought forecast and 13% under actual production in 1987. Added to existing stocks, the crop would push total domestic supplies to about 1.94 billion bushels, the lowest in four years. The United States will depend on sizable soybean crops in Brazil and other foreign suppliers to keep world prices from skyrocketing.

The developments came as state officials reported further deterioration in the corn crop across the Midwest, particularly in Illinois, Indiana and Ohio. In Indiana, 90% of the state’s corn crop is in poor to very poor condition, up from 65% a week earlier; in Ohio, the figure is 72%, while in Illinois it is 66%.

In central Illinois, which has some of the best corn-producing fields in the nation, the crop was reported to be at only half of its normal height. “It’s looking pretty sad,” said Donald E. Meyer, agricultural extension agent for McLean County, which is often the biggest corn producing county in the Midwest.

“I’ve traveled the state extensively, including trips to my own farm, and if this thing turned around today we’d see no better than a 50% crop,” said Illinois Agriculture Director Larry A. Werries. “We are in for a greater deviation from normal than the state has ever seen including in 1934, when crops were off by a third.”

Illinois, Indiana and Ohio are among the nation’s biggest corn-producing states after Iowa, where 55% of the corn crop was reported in poor to very poor condition last week. However, much of Iowa was bathed with weekend rains that analysts believe led to slightly improved crop conditions this week.

Soybean Crop Fair to Good

“That rain has really come through,” said Peter Wenstrand, president of the Iowa Corn Growers’ Assn. “We’ve had two rains in the last two weeks and before that it hadn’t rained in five weeks.”

In two other major corn-producing states, Minnesota and Wisconsin, about half of the corn crop is in poor to very poor condition, while in Nebraska, where most of the fields are irrigated, 63% of the corn is in fair condition and 30% is in good condition.

Despite the drought, more than half of the region’s soybean crop is reported to be in fair to good condition. Soybeans become dormant during periods of drought and still have a few more weeks before the lack of water will become critical although yields are probably already affected, analysts said.

Art Pine reported from Washington and Larry Green reported from Chicago. Times Intern Rhonda Bergman in Chicago contributed to this story.