Midwest drought impact eased by corn reserves

The hot, rainless days of the last six weeks have taken a heavy toll on Norman McAllister's corn crop. This Illinois farmer from the state's westernmost Adams County says he thinks his crop yield will be about half of what it was last year.

He still hopes for rain for the sake of his soybean crop. But he suspects that more water now would probably help his morale more than it would his beans.

What he is pleased about is his decision earlier this year to let half his usual corn acreage lie idle under Washington's payment-in-kind (PIK) program, under which he is guaranteed an 80 percent return on what he would normally harvest. He will be paid in grain - worth more because supplies are tighter. PIK has been a ''lifesaver,'' he says.

The drought which has parched parts of the great corn belt's soil to the point of powder is bad news for some farmers. But, conversely, the weeks of rainless weather have also helped put supply and demand for corn back into balance. And any increase in grocery prices for American shoppers later this year is likely to be modest.

Certainly there are ample reserves of corn for the nation. One aim of PIK was to reduce the heavy grain surplus. The drought is helping to achieve that goal.

''The drought isn't good for the farmer who has nothing to sell, but between mother nature and the PIK program, it's going to bring the supply-and-demand situation much more into balance,'' observes the American Farm Bureau's Gene Malone.

''This is helping us reduce reserves to a more meaningful level, but the overall supply is going to be adequate,'' agrees Norton Strommen, USDA chief meteorologist. He notes that corn crops in much of Michigan, southeastern Wisconsin, north-central Iowa, northeastern Illinois, Colorado, and Nebraska have been faring well under local weather conditions.

Also, net farm income - including PIK commodity payments - is expected to go up by $5 billion to $6 billion this year, according to the USDA. Those farmers who did not take part in the PIK program and who will harvest normal corn crops this year will fare better than usual because of higher grain prices. USDA economist Gary Lucier says many farmers will come out ahead, even with a lower-than-normal per-acre yield.

However, corn farmers who did not participate in PIK, do not have Federal Crop Insurance, and are in the driest sections of the Midwestern corn belt (parts of Iowa, Missouri, Illinois, and Indiana) are taking the hardest knocks from this summer's unusual weather. Some have been chopping up for silage what crops they have. Others say they will harvest only a bushel or two an acre. A few won't harvest at all. Last year's average yield per acre was well over 100 bushels.

The governors of Missouri, Indiana, and Iowa have requested disaster aid from Washington, which would largely be awarded as low-interest loans. A US Department of Agriculture (USDA) workshop on the drought, to which governors of farm states are being invited by President Reagan, is scheduled to be held in Chicago Sept. 2.

Iowa, the nation's top corn producer, last year supplied 1.6 billion bushels of the nation's 8.4-billion-bushel production total. This year, the state is expected to produce a far more modest 980 million bushels of corn. The most recent report of the Iowa Crop and Livestock Service rates 84 percent of Iowa's corn crop in ''fair'' to ''very poor'' condition.

''I can't even remember the last time we had a 'very poor' rating,'' says Steven Daughterty of the Iowa Corn Growers Association. ''Some farmers haven't had any ears at all - it's just really bad.''

Parts of Illinois, second-largest US corn producer, also have been hard hit. The Illinois Agriculture Department estimates that about 30 percent of the corn crop here was lost during July because of the drought. The Illinois Farm Bureau and a number of farmers in a convoy of cars have been checking out the situation on a field-by-field basis.

''I think in most areas we'll see fairly early harvesting, because everything has dried up so early,'' predicts John Campen, Illinois Corn Growers Association manager.

The combined effect of PIK and the weather is expected to reduce corn production this year to about 4.7 billion bushels, or a little over half last year's total. But with the record 3.4-billion-bushel surplus left from bumper crops of the last two years, there still is expected to be a reserve of 1-1.5 billion bushels after export commitments and domestic needs are filled.

''I don't think anybody's going to go under or stop farming because of this drought,'' says Jim Altemus of the Illinois Farm Bureau. ''That alone won't plow under a good farm. We're not talking about zero yield, in most cases.''

The consumer will notice some effects of the drought in grocery shopping. USDA economist Ralph Parlett says food prices - mostly for meat - will be up 1-2 percent during the second half of 1984. The rise in the price of corn, most of which is used for animal feed, is prompting many livestock farmers to sell breeder stock to cut production costs. For a time there will be a glut of meat on the market - a good time for shoppers to stock up freezers. But corn prices are expected to have a minimal effect in pushing up the price of bread, cereal, corn oil, and other staples.

USDA experts insist that, overall, the situation is far less severe than it might have been. The ample corn reserves on hand help enormously. And Mr. Strommen, the USDA meteorologist, points out that most farmers have had a ''bountiful'' first hay crop and a record wheat crop already this year. He notes that the National Weather Service's 30-day forecast includes normal rainfall for much of the East Coast, which grows a sizable part of the nation's soybean crop.