Agricultural Economy: Isaac Impacts
Jack Healy and Bret Schulte reported in Saturday’s New York Times that, “As Gulf Coast residents confronted a waterlogged landscape of flooded homes and debris-covered streets on Friday, tatters of what had been Hurricane Isaac blew toward the parched Midwest, dumping more than a foot of rain, causing isolated flash floods and leaving thousands of people without power.
“Heavy rains overwhelmed drainage systems in parts of Arkansas, flooding roads and prompting some emergency rescues. But after a scorching summer, dry soil and low-flowing rivers and streams appeared to be absorbing much of the rain, officials said.”
The Times article noted that, “Farmers and cattle ranchers across the Midwest watched the darkening skies with a mix of hope and anxiety. The storm was coming too late to revive their devastated corn crops, but a good, soaking rain could replenish wells, water their brown pastures and help prime the fields for winter wheat planting. Too much rain all at once could flood them out, however, and heavy winds had the potential to blow down their fragile cornstalks.
“And some said they had been bypassed altogether, let down once again by the false promise of rain.
“‘It sprinkled a little bit this morning and tried to shower a bit, but the ground is still dry,’ said Jim Stuever, a farmer who grows corn, cotton and soybeans outside Dexter, Mo.”
Reuters news reported on Saturday that, “As the worst drought in nearly half a century remains deeply entrenched across nearly two-thirds of the United States, Isaac was expected to be a mixed blessing for the parched farm belt.
“Experts said its rains came too late for this season’s crop of corn and most soybeans, but they could help speed up pasture recovery and get the U.S. winter wheat crop off to a good start.
“The U.S. Department of Agriculture on Tuesday is to release estimates of Isaac’s damage to cotton and rice crops in the Mississippi Delta and lower Mississippi Valley region.”
Jack Healy reported in today’s New York Times that, “All through the scorching summer, as their crops withered under cloudless skies, Corn Belt farmers waited and prayed for this moment. Now, courtesy of Hurricane Isaac, it has finally arrived: three days of rain to soak their parched fields and soften the cracked soil.
“‘It’s a dead-still, straight-down rain,’ Greg Schneider, who lost 80 percent of his corn crop to this summer’s drought, said as he watched the storm from his dining room window. ‘This is exactly the kind of rain we needed.’
“But the timing was off. They needed this rain — and more — two months ago, when their shriveled corn was broiling in its husks, their pastures were dying and their soybeans were dropping to the ground. Farmers from Missouri to Indiana to Ohio welcomed the three to five inches of rain the remnants of Isaac brought as they churned east across the Midwest, but they said it came too late to save much of this year’s failed crop.”
Today’s article, which was datelined from Warrenton, Mo., added that, “This is corn country, and for the most part, the battle to save the corn is already lost. Nationwide, the government has drastically reduced its estimates for the year’s corn yield to the lowest levels since 1995.
“Months of searing heat accelerated the growing cycle this summer, and farmers here have already harvested corn that in normal years would still be ripening. As Isaac approached, many raced to finish hauling in the corn, worried that the storm could flood their fields or mow down the brittle cornstalks, destroying even more of the paltry harvest.
“Those fears did not materialize, however. As the rains washed across Missouri over the weekend, they recharged wells, refilled shrunken irrigation ponds and trickled into parched creek beds. Farmers watched happily as their soybean fields drank up the moisture. Ground that had been nearly impermeable to plow blades began to squish underfoot.”
Reuters writer Sam Nelson reported late last week that, “Farmers in the top rice-producing state of Arkansas were harvesting their crop at breakneck speed, industry sources said Thursday, in a bid to limit damage from Hurricane Isaac, which had weakened and made landfall as a tropical storm.
“The potential threat to the rice crop from Isaac comes on the heels of the worst drought in half a century, which devastated corn and soybean crops in the Midwest farm belt, but had been beneficial to rice plantings.”
The article pointed out that, “Chuck Wilson, director of the Rice Research and Extension Center for the University of Arkansas said the storm was entering southern Arkansas near mid-morning and that about 65 percent of the crop was still in the field.
“Wilson said Arkansas farmers had been counting on a possible record rice yield of over 7,200 pounds per acre and above the USDA forecast for 7,196 pounds per acre.”
Meanwhile, Julie Cart reported in yesterday’s Los Angeles Times that, “Drought has reduced the Mississippi to a relative trickle, and even the dozens of inches of rainfall from Hurricane Isaac will change little on the river. The best crops of corn and soybeans in a generation are awaiting shipment by Mississippi barges — and won’t wait forever before spoiling. The window is about 10 days, and once it closes, consumers across the country will feel the bite of higher prices.
“All along the lower Mississippi — from Memphis, Tenn., to New Orleans — water levels are at record lows. Sandbars have appeared in midstream, and broad beaches now spread out at the edges of what were green riverbanks. Traffic has slowed to a crawl and, on some stretches of the river, has been at a standstill since June as water levels have dropped so low that even barges requiring just 9 feet of water are running aground.
“With river traffic jammed up, much of the Deep South’s agricultural economy is on hold and most of its ability to ferry oil, coal, fertilizer and other products is diminished.”
The LA Times article pointed out that, “To compound the region’s misery, Isaac’s drenching of the Gulf Coast threatens to spoil the rest of the soybean crop still in the Delta’s fertile fields, while doing little to restore water levels. That depends on rainfall in the Midwest and upper reaches of the river.”
Agricultural Economy: Commodity Prices- Repercussions
Bloomberg writers Nicholas Larkin and Whitney McFerron reported on Friday that, “Corn and soybean traders extended their longest bullish outlook in at least 11 months on speculation rain in the U.S. will come too late to revive crops after the worst drought in a half century…[T]he worst U.S. drought since 1956 and dry weather in Eastern Europe and Russia drove corn to a record $8.49 a bushel this month. Food prices tracked by the United Nations rose the most since 2009 in July. Rain in the Midwest may be too late to improve yields because farmers already started the corn harvest and soybeans are reaching maturity. Credit Suisse Group AG said Aug. 29 the rally will to continue for several more months.”
(Recall that Gregory Meyer reported last week at The Financial Times Online that, “Soyabean futures rallied to a new record high on strong US exports and the danger of further deterioration of this year’s drought-damaged crop…CBOT September soyabeans rose as high as $17.80¾ per bushel, up 1 per cent on the day and beating a previous record reached on July 20 [related graph].”)
On Friday, the U.S. Department of Agriculture’s National Agricultural Statistics Service released its monthly Agricultural Prices report, which stated that, “The corn price, at $7.54 per bushel, is up 40 cents from last month and 66 cents above August 2011 [related graph]. The all hay price, at $184 per ton, is unchanged from July but is $5.00 higher than last August…and…The soybean price, at $15.90 per bushel, increased 50 cents from July and is $2.50 above August 2011 [related graph].”
And Owen Fletcher reported in Saturday’s Wall Street Journal that, “U.S. wheat futures fell 1.5% after Russia said it had no plans to limit grain exports, disappointing traders who were betting on changes that could have boosted demand for the U.S. crop.
“Wheat futures for September delivery declined 13.4 cents to $8.70 a bushel at the Chicago Board of Trade. They finished up 0.3% for the week [related graph].”
News reports indicate that the relatively higher prices of corn and soybeans are impacting livestock production.
Melissa Allison reported last week at the Seattle Times Online that, “The worst drought in decades is expected to reverberate in the meat-consuming public’s pocketbook, as fewer animals and more expensive feed crops rock the economics of the cattle, pork and poultry industries.
“Many are bracing for higher prices, but how high they will go remains unknown while the drought and its impact, along with other food-price variables, play out.”
The article explained that, “A longer-term problem could be the cattle supply.
“Their numbers are already low from years of ranchers getting out of the business and a lingering drought in Texas and Oklahoma. The past 15 years have seen a 10 percent drop in the number of cattle and calves — to 97.8 million animals, the lowest in decades [see related graph].”
Ted Booker reported yesterday at The Watertown Daily Times (NY) Online that, “Because the drought is expected to reduce fall harvest corn and hay yields in Jefferson County by 10 to 20 percent, most dairy farmers will be forced to buy more forage to feed their cattle or downsize their herds by selling more to slaughterhouses, observers say.”
And John H. Cushman, Jr. reported in Saturday’s New York Times that, “In the federal government’s efforts to help farmers and ranchers survive this year’s devastating drought, perhaps the most surprising step has been a dose of support for struggling producers of catfish.
“It’s not that their ponds, shimmering across some of the poorest counties from Alabama to Arkansas, were drying up, although the catfish industry has been shriveling for 10 years.
“Rather, catfish assistance came as part of a $170 million federal purchase of pork, chicken, lamb and fish announced in early August, all intended to prop up farmers hit by skyrocketing prices of feed like corn and soybeans.”
The article indicated that, “The Agriculture Department, in addition to its routine purchases for school lunches and food banks, would buy an extra $10 million of catfish, the administration announced.
“That would be more catfish than the government bought all last year, and enough to put a significant dent in a glut of catfish that has left fish farmers squeezed this year between rising feed costs and falling prices for the fish.
“Whether it is enough to head off the continuing collapse of the industry is another question, catfish specialists say.”
The “Washington Insider” section of DTN reported on Friday (link requires subscription) that, “House Agriculture Committee Vice Chairman Bob Goodlatte, R-Va., says he and other House members in both political parties may introduce legislation to adjust the federal ethanol production mandate if the Environmental Protection Agency does not set it aside in the face of a continuing drought in the farm belt.
“EPA currently has the proposal under consideration, and Goodlatte told the press he hopes the agency will signal its intent to waive the mandate by the end of September in response to growing concerns about rising prices for corn-based feed.”
The DTN item noted that, “‘Now is the time for her to act,’ said Goodlatte of EPA Administrator Lisa Jackson. ‘If she doesn’t get rid of the mandate, we will be pushing hard for the legislation.’
“Support for reducing or waiving this year’s mandated use of 13.2 billion gallons of corn-based ethanol continues to grow as more livestock, dairy and poultry producers confront a shrinking supply of old-crop corn and a drought-reduced harvest this year. As a consequence, it may become increasingly difficult for the Obama administration to stick to its guns with regard to maintaining the Renewable Fuels Standard mandate.”
On Friday, the National Journal Need-To-Know Memo (Daily Email) stated that, “The farm bill has been sitting in limbo during the August recess, and the Republican platform highlights one obstacle to its passage. The platform calls for turning food stamps into block grants for states — a proposal made by Paul Ryan in his budget. ‘The food stamp program now accounts for nearly 80 percent of the entire USDA budget. In finding ways to fight fraud and abuse, the Congress should consider block-granting that program to the states, along with the other domestic nutrition programs,’ the platform says. The problem with that plan: It makes passage of the farm bill much more difficult, because nutrition programs are the component most important to urban and suburban legislators.”
Meanwhile, J.D. Sumner reported on Friday at the Albany Herald (Ga.) Online that, “Southwest Georgia’s dependency on farming and defense is not easily overstated.
“That’s why U.S. Rep. Sanford Bishop, the Democratic member of the House of Representatives for Southwest Georgia’s 2nd, seems so intent on spreading the word about the massive looming defense spending cuts and Congress’s failure to pass the farm bill while he’s out on his August recess.”
The article stated that, “Regarding the farm bill, Bishop says that the Senate sent over a farm proposal that some anticipated would be voted on quickly, but a group in the House is holding the bill up.
“‘There’s a particular group that isn’t happy with some of the programs in the bill and so the Speaker has said that he’ll hold it until he feels he has enough votes to pass it,’ Bishop said.
“The farm bill is crucial to farmers because it signals what programs will or won’t be subsidized by the federal government, which allows them to plan how best to run their farms.”
The article added that, “‘The last thing farmers need right now is uncertainty,’ Bishop said. ‘And that’s what we have. They need to know what is in this bill so that they can finance equipment, purchase seed and do what they need to do.’
“And if anyone is expecting Congress to act before the November election on either issue, Bishop is pessimistic.
“‘As a practical matter, I don’t think you’ll see any action on it before then,’ Bishop said.”
And, a news release late last week from Sen. Kirsten Gillibrand (D., N.Y.) stated that, “While standing at the Chobani Yogurt Plant, [Sen. Gillibrand] and U.S. Representative Richard Hanna today announced support for the reclassification of Greek yogurt under the U.S. Department of Agriculture’s (USDA) MyPlate nutrition guides. Currently, Greek yogurt is not differentiated from traditional yogurt. However, Greek yogurt has twice the protein than regular yogurt.
“‘Greek yogurt should be a protein option during lunch in our schools,’ Senator Gillibrand said. ‘Our dairy industry is vital to New York State. Greek yogurt has so much protein because it requires up to three times the amount of milk. This is a win for our students and a win for our community.’”