Drought's economic effects yet to come, largely unknown

Friday, August 3, 2012
Corn in a field near Pocahontas has been cut early due to drought conditions as seen Thursday, Aug. 2, 2012. (Fred Lynch)

Row upon row of brittle, rust-colored corn plants with empty ears. Dusty pastures devoid of nutrition. Where water once flowed freely, only dry creek beds remain.

Devastating doesn't begin to describe this drought.

The immediate effects of the drought, which some say may rival the dust bowl of the 1930s, are easy to see now, but the economic consequences are yet to come and largely unknown.

"We don't have any hard numbers at this point. It's still pretty early in the game," said Patrick Westhoff, director of the Food and Research Policy Institute at the University of Missouri-Columbia.

Next week, economists will have a better idea as the USDA will release its first estimate of the size of the nation's corn crop since the drought intensified.

"We all know it's bad, we just don't know how bad it really is. We don't have a good feel for it yet," he said.

Much of Southeast Missouri is in the most critical category on the U.S. Drought Monitor, classified as in "exceptional drought."

While Cape Girardeau received 2.24 inches of rain in July at the airport, rainfall through out the region was too scattered and short-lived to improve conditions, said Mary Lamm, service hydrologist with the National Weather Service in Paducah, Ky.

Rodney Mirly attaches a milker to a Jersey cow Thursday, Aug. 2, 2012 at the Jerry Siemers dairy farm west of Cape Girardeau. Milk production has decreased due to the drought conditions. (Fred Lynch)

"It's not enough to recharge the overall soil moisture," she said. Cape Girardeau is 14.29 inches below normal rainfall, having received just 13.74 inches so far in 2012.

Crop insurance will be critical in determining how severely farmers are affected by this year's drought, Westhoff said. For some, crop insurance benefits may make up for most of what they've lost.

Producers in the Bootheel typically have lower levels of crop insurance coverage than other parts of the state, or other corn-growing states like Iowa and Illinois, Westhoff said.

Crop insurance pays out on a sliding scale based on current crop prices and farm revenue.

Corn, the crop most immediately threatened by the drought, was at $7.96 a bushel Thursday, up 14 percent in the last month.

Statewide, 83 percent of corn is in poor or very poor condition. Southeast Missouri's corn crop is faring better than most of the state, but still has 61 percent of the corn crop is considered to be in poor or very poor, according to the latest Crop Progress Report released Monday by USDA.

David Reinbott, agriculture business program director for the University of Missouri Extension in Scott County said after past droughts and last year's flooding, the number of farmers seeking crop insurance is increasing in the Bootheel.

"The actual effect for some folks may not be all that great, but for folks down there who don't have coverage, or only have catastrophic coverage, then they'll obviously have a serious situation," he said.

Beef and dairy farmers are struggling to keep their animals alive while faced with rising feed costs, a shortage of water and excessive heat. Cows, overwhelmed by temperatures topping 100 degrees, are naturally aborting their calves, local farmers said.

Round bales of hay are fetching as much as $100, when they typically cost about $30, said Larry Miller, president of the SEMO Cattlemen's Association and a farmer near Neelys Landing.

Dairy farmer Jerry Siemers of Cape Girardeau said his feed prices have gone through the roof.

"It's a losing money situation," he said. "These cows just cannot handle this 100-degree weather. We dropped 1,000 pounds of milk on our pickup today from what we were two days ago. That's equal to about a $180 loss in just one day. They're not eating less, but they're producing that much less."

Programs expired

Unlike grain farmers, livestock producers don't have an equivalent of crop insurance. Three U.S. Department of Agriculture livestock disaster assistance programs expired in October, leaving them without a safety net.

The U.S. House of Representatives on Thursday passed an emergency agriculture bill, including language written by U.S. Rep. Jo Ann Emerson, a Cape Girardeau Republican, reinstating these the Livestock Forage Assistance Program, the Emergency Livestock Assistance Program and the Livestock Indemnity Program.

"The drought which is devastating U.S. producers of agriculture throughout the nation poses a serious threat to every American family which plans on visiting a grocery store this year," Emerson said on the House floor while holding a photo of a dairy farm near Mountain Grove hard hit by the drought. "American farmers and ranchers are on the ropes right now, and this legislation is desperately needed."

The legislation is a stopgap measure to provide disaster relief while the House still hasn't voted on the farm bill passed in June by the U.S. Senate. The bill, which passed with a vote of 223-197, will now move into the Senate. Neither the House nor Senate will be in session for the next several weeks as legislators return to work in their districts.

The drought's effect on food prices will be noticeable, with the USDA projecting last week that the consumer price for beef will increase 3.5 to 4.5 percent this year. The USDA's consumer price for pork is expected to increase 2 to 3 percent this year. Poultry prices will go up 3.5 to 4.5 percent. Dairy products are forecast to rise 2 to 3 percent this year.

While agriculture is a big part of the Southeast Missouri economy, Dr. Bruce Domazlicky, director of the Center for Economic and Business Research at Southeast Missouri State University, said people should be careful not to overestimate its impact.

"The economy of Southeast Missouri is quite large and diverse so that while there will be localized impacts due to the drought -- reduced incomes for farmers means their spending is less, that affects input suppliers to agriculture, for example -- overall the region should not experience any major slowdown due to the drought," he said.



Pertinent address:

Cape Girardeau, MO

Map of pertinent addresses

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