Despite record drought, farmers expect banner year
After one of the driest summers on record, recent rains have helped in some parts of the country. But overall, the drought has still intensified. The latest tracking classifies more than a fifth of the contiguous United States in "extreme or exceptional" drought, the worst ratings.
In some parts of the lower Midwest, water-starved crops have collapsed, but the farmers have not. Farmers across the country are surviving, and many are even thriving. This year, despite the dismal season, farmers stand to make exceptionally good money, according to the U.S. Department of Agriculture.
"Here in 2012, USDA expects net farm incomes to reach their second-highest level on record," said Jason Henderson of the Federal Reserve Bank of Kansas City.
There are a few reasons for these incredible gains after the brutal drought. For one, with fewer crops being produced, the prices of those crops skyrocketed.
"Crop prices, grain prices, oilseed prices, wheat prices — prices are very, very high," said Dave Swenson, who teaches economics at Iowa State University.
Corn, for instance, has been trading in the $7.50 range lately. There are two major — and familiar — factors driving up price: supply and demand.
The drought has cut deeply into the corn supplies. It’s destroyed more than two billion bushels of corn that would otherwise have been produced, about 17 percent of the projected harvest, according to USDA estimates.
Demand, however remains strong. Ethanol production has slowed considerably, but the global appetite for U.S. corn is high, exacerbated by rising standards of living, and weather-related production disruptions in Russia and elsewhere.
Swenson said that farmers unscathed by the drought, through irrigation or good luck, are having a banner year, and farmers harvesting half their corn, are still stand to sell the their crop for a lot more than a bumper harvest would have brought a decade ago, when corn prices hovered around $2 a bushel.
Roy Berghaus, who farms the hills near Farmington, Mo., figures he'll make ends meet, harvesting only a third of his normal corn crop.
"Price is the only salvation," he said. "Hopefully it will keep the operation going."
While those high crop prices meant deliverance for some, farmers with animals got the worst of the drought this year as feed grew scarce and extremely expensive.
"I honestly probably wanted to quit several times, just hang it up," dairy farmer Julie Neill of Freeman, Mo., said of the trying summer months. "But there was a lot to that decision. It was giving up a lifetime of everything that we have made."
These days, Neill and Sons Dairy looks pretty lush after a rain, with happy cows crowding together for a drink of fresh water. But all summer, Neill watched the pastures wither and the business unwind. The Neills had to borrow heavily, about $50,000, just to keep their cows alive. Neighbors lent encouragement, and heavy equipment. The farm was in intensive care.
"Honestly, I think it was more on death row," Neill said. "It just didn't feel like it was ever going to end."
For the Neills, relief came as the remnants of Hurricane Isaac — the storm that slammed Louisiana in August — quenched large parts of Arkansas and Missouri.
"We had 5 1/4 inches of rain here," said Neill's husband, Eric. "We had no runoff. Within four days, we had grass growing, and the cows started grazing again."
Today, the Neills’ cows stand in a field of bright green, knee-high grass, gobbling their fill and making milk.
But 45 miles west of Neill and Sons, near Baldwin City, Kan., Isaac petered out, bringing too little rain too late in the season to help Luke Ulrich's corn crop.
As Ulrich pilots his big, green combine, harvesting the last eight rows of this year's ragged crop, it amounts to far less than half the normal yield — typical of what farmers are pulling in across the lower Midwest where drought destroyed billions of bushels of corn.
Ulrich and his brother Jordan are looking to government-subsidized crop insurance to help make up for some of the havoc the drought wreaked on their farm. The insurance, which most Corn Belt farmers carry, is another major boost for farm income: It will likely pay out upward of $15 billion this year.
"Definitely the crop insurance helps, but everybody's situation's different," Jordan Ulrich said.
The crop insurance will only help the Ulrich brothers so much, because they have especially high overhead: They rent farm land and carry a lot of debt. Crop insurance won't pay the mortgage, though the USDA is offering very low interest emergency loans for farmers in their situation.
But Luke Ulrich said there's another way they're staying afloat: newer hybrid soybeans that hung on and are expected to produce a fairly decent and very lucrative crop. "The only bright spot, and I use that term loosely, [is] we can't figure out how these soybeans stayed alive," he said.
While the drought is far from over, U.S. agriculture seems to be coping better than expected. Farmers aren't being forced off the land in huge numbers, and many will go into next year with the tools they need to keep producing enormous amounts of food, weather permitting.