FarmPolicy

Drought Concerns Grow as Farm Bill Awaits House Floor Action

Jack Farchy reported on Friday at The Financial Times Online that, “Is the world on the brink of another food crisis?

“It has become a distressingly familiar question. With the price of agricultural staples such as corn, soyabeans and wheat soaring for the third summer in five years, the prospect of another price shock is once again becoming a prominent concern for investors and politicians alike.”

The FT article explained that, “The debate marks a dramatic shift from just a few weeks ago, when traders were expecting bumper crops and policy makers were comforting themselves that – if nothing else – falling commodity prices would offer some relief to the troubled global economy.

“But since then, scorching heat and a paucity of rain across the US has withered the country’s corn and soyabean crops [related graphs here and here], with the US Department of Agriculture this week making the largest downward revision to its estimate for a corn crop in a quarter of a century.

“The US is crucial to supplying the world with food: the country is the largest exporter of corn, soyabeans and wheat, accounting for one in every three tonnes of the staple grains traded on the global market.”

Friday’s article pointed out that, “Moreover, the low level of global inventories for some grains means that any further disruption to supplies could be devastating.

Global corn stocks are forecast by the USDA to fall to just 15 per cent of annual demand, close to a record low.

“Hussein Allidina, head of commodities research at Morgan Stanley in New York, says: ‘I don’t think the alarm bells need to be sounded yet. But unlike previous years, we don’t have the inventory cushion for insurance against any further yield downgrades.’”

University of Illinois Agricultural Economists Darrel Good and Scott Irwin provided a timely analysis on Friday at the farmdoc daily blog regarding potential corn yields and the corn balance sheet (“Rationing the 2012 Corn Crop – Are We There Yet?”).

In part, Friday’s update indicated that, “A continuation of widespread stressful weather suggests that the average U.S. corn yield could be lower, perhaps much lower, than 146 bushels. At the same time, the price of December 2012 corn futures has increased about $2.00 since mid-June as production prospects continued to deteriorate, putting prices well above the average currently projected by USDA. A key question in the market outlook is whether the current level of prices is high enough to ration usage in light of substantially diminished expectations about supply. Further questions about the price level are raised by the prospect of even smaller production if weather conditions do not take a turn for the better.

“We provide estimates in Table 1 of how the corn crop would be allocated to various uses and the implications for price under several alternative yield scenarios. We consider scenarios where U.S. average yields range from 140 bushels to 125 bushels, in 5 bushel increments. Please note that the yield scenarios reflect what we believe is a plausible range of yield outcomes for this ‘what if’ analysis, but we do not take a position on the likelihood of any particular scenario at the present time.”

After additional analysis, including an explanation of assumptions, Professors Good and Irwin noted that, “In closing, it is important to emphasize that our analysis should be viewed for what it is—a simple, first take on what might happen under alternative corn yield scenarios. How actual market dynamics will be worked out is fraught with complexities. In particular, we are in uncharted territory regarding the interaction of the corn, ethanol, and gasoline markets in a major drought. This adds even more uncertainty to what is already an extremely volatile market situation.”

A Purdue University news release noted on Thursday that, “Indiana dairy producers feel the pain of their corn- and soybean-farming brethren. The weekslong drought literally is drying up feed supplies in the field and leaving producers with some tough decisions, say two Purdue Extension dairy specialists.

“Producers need to act now to make sure they have access to alternative feed sources if dry conditions persist and they plan to continue operating their dairies at current herd size, said Tamilee Nennich and Mike Schutz. Some dairy producers might need to reduce herd sizes in order to survive, they said.”

As producers of both livestock and grains continue to gauge supply and price scenarios, an update posted yesterday at The Weather Channel Online noted that, “In a monthly report to be released Monday, the National Climatic Data Center is expected to announce that this year’s drought now ranks among the ten largest drought areas in the past century.”

News reports from around the Midwest provide a more detailed look at growing conditions.

Jennifer Preston reported on Friday at The Lede Blog (New York Times) that, “The News-Sentinel [Fort Wayne Ind.] reports that the corn in some of the fields of Allen County is already ‘completely lost.’

“‘Corn is anywhere from knee-high to waist-high,’ Gonzalee Martin, agriculture and natural resources educator with Purdue University’s Allen County extension office, told The News-Sentinel. ‘Much of it has already tassled with no ears at all. Much of it’s going to be completely lost.’”

Moni Basu reported on Friday at CNN Online that, “Now, as punishing drought grips the Midwest, [Ind. Farmer Don] Villwock, 61, walks his hard-hit 4,000 acres in southwest Indiana in utter dismay…[P]ull back an ear’s husk and you find no kernels, he says. With temperatures rising above 95 degrees, the pollen starts to die.”

Andy Ostmeyer reported on Friday at The Joplin Globe (Mo.) Online that, “John Hobbs, a University of Missouri Extension agent in Newton and McDonald counties, said some farmers planted earlier this year because of the warm spring, and they may get 60 to 70 bushels per acre, down from an average of 110 to 120 bushels per acre. Some of the corn that was planted later in the spring will end up being chopped for silage and fed to cattle.”

While the Columbia Missourian noted on Saturday that, “Jay Fischer, who farms about 1,500 acres near the Missouri River about three miles from Jefferson City, has to search through green stalks for about two minutes to find a single ear of corn in his crop.”

In addition, an update from University of Missouri Extension on Friday noted that, “Spider mites are destroying soybean fields already hit by drought, a University of Missouri entomologist told a meeting of certified crop advisers (CCA) at MU Bradford Research Center.”

Jim Hillibish reported on Saturday at The Repository (Canton, Ohio) Online that, “If the harvest doesn’t come through, and with the sky-high cost of feed, ‘we may not have enough feed to feed our cows,’ said [Tim] Royer. ‘So what do you do? Sell off’…Royer said his family is not at that point yet, ‘but it’s in the back of my head.’”

On Friday, FarmPolicy.com took a picture of an ear of corn picked out from a field in East Central Illinois; unfortunately, this pitiful ear is representative of how the crop looks throughout the area.

The AP reported yesterday that, “With a half-century of farming under his belt, James Laird struggles to recall a summer worse than this one — the drought has turned the corn crop he once had high hopes for into a complete, kernel-less bust. Soon, he’ll be chopping it all to pieces and feeding it to his 150 head of cattle.

“Yet Laird, 71, suspects there are other growers worse off with cornstalks half the size of even his. So, he’s unsure why his farm near Waltonville, Ill., about 80 miles east of St. Louis, was chosen as the place Gov. Pat Quinn will get his first real look Monday at the drought’s ravages.”

And in Michigan, a variety of weather related events, starting with an unseasonably mild winter, have resulted in widespread crop problems.  Carol Cain indicated yesterday at The Detroit Free Press Online that, “‘It’s a huge disaster,’ [Sen. Debbie Stabenow, D-Mich., chairwoman of the Senate Committee on Agriculture] said of the weather’s toll. ‘In Michigan, 72 of 83 counties are a disaster. This is the worst situation in decades. Maybe forever.’

“More than 1,000 farms in Michigan are affected. ‘I’ve heard estimates of up to $1-billion loss in crops,’ she added.”

Jack Healy reported in today’s New York Times that, “As a relentless drought bakes prairie soil to dust and dries up streams across the country, ranchers struggling to feed their cattle are unloading them by the thousands, a wrenching decision likely to ripple from the Plains to supermarket shelves over the next year.

“Ranchers say they are reducing their herds and selling their cattle months ahead of schedule to avoid the mounting losses of a drought that now stretches across a record-breaking 1,016 American counties. Irrigation ponds are shriveling to scummy puddles. Their pastures are brown and barren. And they say the prices of hay and other feed are soaring beyond their reach.”

Bloomberg news reported on Friday that, “Producer prices for finished goods unexpectedly rose in June for the first time in four months, reflecting an increase in food costs… The gains in the producer price index were led by a 0.5 percent increase in food, reflecting the biggest increase in meat prices since July 2011, the report showed.”

Interestingly, The Washington Post editorial board dismissively and without hesitation opined today that, “But any notion that farming is a precarious, hardscrabble business, or that the American diet is vulnerable to supply disruptions, is absurd.”

With respect to policy issues and the drought, a news release Friday from Sen. Tim Johnson (D., S.D.) stated that, “Senators Max Baucus (D-Mont.), Kent Conrad (D-N.D.), Jon Tester (D-Mont.) and [Sen. Johnson] introduced legislation today to provide a one-year extension of agriculture disaster assistance programs that expired at the end of the 2011 Fiscal Year. As severe fires and drought threaten ranchers and farmers across the country, this extension will provide certainty for American producers while Congress works to pass the next Farm Bill.”

And speaking yesterday on CNN’s “State of the Union” program with Candy Crowley, Agriculture Secretary Tom Vilsack discussed the U.S. drought and noted the importance of the House bringing the 2012 Farm Bill to the floor for a vote.

Sec. Vilsack explained that, “The real challenge for us though is that the USDA, the Department of Agriculture, does not have the tools it once had to help people through this difficult times. When the disaster programs of the 2008 farm bill expired on September 20 of last year, it left us with very little option in terms of being able to provide help to these folks. And that’s why it’s just imperative that the House leadership get the food, farm and jobs bill that recently went through the House ag committee on the floor and get it voted on before September 30th so we can provide additional help and assistance to these folks.”

Meanwhile, an update posted on Friday at OhioWatchdog.org stated that, “U.S. Rep. Jim Jordan, R-District 4, does not want the pending Farm Bill to pass…During a conference call with bloggers Thursday, he said he would rather extend the current bill and put together a farm package next year that moves in a market direction.”

Peter Wong noted yesterday at the Statesman Journal (Salem, Ore.) Online that, “‘The buzz is that if this had been a Republican-only bill with no Democratic support, it probably wouldn’t have gone far,’ [Rep. Kurt Schrader (D., Ore.) said. “But the (Republican) leadership is now in a box with a big bipartisan vote for the Senate bill (64-35 on June 21) and a bipartisan vote for the (House) committee bill.

“This bill would easily pass the House,” Schrader added. “We have time to do it. We’re not doing anything else except voting for the 34th time to repeal the health care legislation.”

Reuters writer Charles Abbott reported late last week that, “House Speaker John Boehner, the senior Republican in Congress, said on Thursday that ‘an awful lot of good work’ went into the bill. But he added there were ‘no decisions about it coming to the floor at this point.’

“House Democratic leader Nancy Pelosi, who raised the question with Boehner privately, told reporters, ‘I don't know if it will even come to the House floor to be voted on.’ She said the cuts in the farm bill ‘are totally unacceptable.’”

Candace Sipos reported on Saturday at The Daily News-Record (Harrisonburg, Va.) Online that, “Rep. Bob Goodlatte [R., Va.] doesn’t have many definite answers about the latest version of the farm bill – when it might be picked up by the full House of Representatives, how much funding will be cut, when it may be complete – but he does know what he wants to see in it and what he believes would benefit Valley farmers.”

The article quoted Rep. Goodlatte as saying; “It’s going to have a very difficult time on the floor of the House.”

And, forty-six organizations asked House Leadership for floor time for the Farm Bill in a letter on Friday.

Moreover, Joseph Morton reported on Saturday at the Omaha World-Herald Online that, “But House Speaker John Boehner, R-Ohio, no fan of recent farm bills, is less than enthusiastic about bringing the measure up for a floor vote.

“In the past when Congress has struggled to reach consensus on a new farm bill, it has passed temporary extensions of existing law to keep things humming along.

“Sen. Tom Harkin, D-Iowa, said this week that the makeup of the House could make such an extension far from routine.”

In more detailed reporting regarding SNAP (nutrition) issues, Judson Berger reported on Friday at Fox News Online that, “The Department of Agriculture moved Friday to ‘cease future production’ of advertisements that encourage people to go on food stamps, FoxNews.com has learned, following criticism over what was described as an ‘aggressive’ campaign to grow enrollment.”

However, the editorial board at The Columbus Dispatch opined on Saturday that, “Given the amount of taxpayer money involved, as well as the public interest in ensuring that the needy do not lack for healthful food, it’s unacceptable that the government won’t release data on where and how money from food stamps — formally known as the Supplemental Nutrition Assistance Program, or SNAP — is spent by those receiving assistance.”

The New York Times editorial board indicated on Saturday that, “The House Agriculture Committee has approved an unconscionable farm bill that protects grossly generous subsidies for the agriculture industry by cutting food stamps by a staggering $16.5 billion over the next decade.”

In news regarding the King Amendment (additional background here) Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “Rep. Steve King’s (R-Iowa) attempt to stop California laws that regulate egg-laying hens and foie gras has escalated an animal-rights battle.”

The Hill update stated that, “[Wayne Pacelle, the head of the Humane Society] noted that when it comes to a farm bill conference, Senate Agriculture Chairwoman Debbie Stabenow (D-Mich.) is a co-sponsor of the Senate standalone egg bill, which is sponsored by Sen. Diane Feinstein (D-Calif.). He noted she has said she would try to work it into a farm bill during the negotiations.”

Kim Geiger reported on Friday at the Los Angeles Times Online that, “The [King Amendment] measure was debated for about 20 minutes [FarmPolicy.com audio replay of the discussion here], with Democrats Dennis Cardoza of Atwater and Kurt Schrader of Oregon the only members to speak against it.”

A San Francisco Chronicle article from last week pointed out that, “The debate was ‘almost like watching a ‘Saturday Night Live’ skit of the House Agriculture Committee,’ said Wayne Pacelle, president of the Humane Society of the United States, an animal rights group that helped pass the 2008 ballot initiative, Proposition 2.”

The article added that, “[Arnie] Rieble, the Petaluma egg farmer, said if King’s amendment survives, ‘California also has pesticide laws for fruits and vegetables. They’re gone. California has its own standards for fluid milk (requiring fortification with Vitamin D). They’re gone.’”

Keith Good

Posted by Keith Good • July, 16, 2012 • 3:13 am