So serious that there may be less corn and soybeans for the U.S. to export, Mr. Vilsack said.
"On exports, we would anticipate and expect they would be reduced," he said, but said the amount would depend on how much further corn and soybean yields are affected by the drought.
The USDA lowered its forecasts for exports and yields of both corn and soybeans in its latest supply and demand report, released July 11. The USDA slashed its forecast for corn yields to just 146 bushels per acre, down from its June prediction of 166 bushels. The average soybean yield was cut to 40.5 bushels per acre, down from 43.9 bushels per acre.
Crop conditions could continue to worsen, he said, but much needed rain could turn the forecasts around. However, the situation isn't bad enough to warrant a reduction in government mandates for corn-based ethanol production, Mr. Vilsack said. There has been recent speculation that a smaller corn crop might prompt the Environmental Protection Agency to lower the mandate in order to take pressure off of rising corn prices.
"There's no need to go to the EPA at this point, based on the quantity of ethanol that's currently in storage," the USDA chief said. "There's no problem in that area at this point in time."
Mr. Vilsack said the administration's tools to deal with the effects of the drought "are somewhat limited" and urged Congress to act quickly to help farmers and ranchers.
Mr. Vilsack said ranchers were most seriously affected and he expects the prices of beef, poultry and pork "may go down a bit, but over time they will rise."
"Our livestock producers are in deep trouble," Mr. Vilsack said. "The most important thing is for Congress to take action."
The announcement adds counties in Arkansas, Georgia, Indiana, Mississippi, New Mexico, Tennessee, Utah and Wyoming to a lengthening list that now includes 1,297 counties in 29 states.
"Our hearts go out to all of those affected by this drought," said Mr. Vilsack, who met with President Barack Obama Wednesday to discuss the drought.
Beyond providing cheap emergency loans to farmers and opening up new land for livestock to graze on, there isn't much the USDA can do, a spokesman said. "Increasingly hot and dry conditions from California to Delaware have damaged or slowed the maturation of crops such as corn and soybeans, as well as pasture- and range-land," the USDA said Wednesday.
Five government disaster programs designed by Congress that paid out hundreds of millions of dollars to drought-affected farmers in recent years lapsed in September last year.
USDA announced last week a reduction on the interest rate for emergency loans to 2.25% from 3.75%. The agency also eased restrictions on grazing and haying on lands designated for conservation, in an effort to provide cheap feed to livestock producers struggling with rising crop prices.
