Drought happens

Update:  Since I wrote this, I had a request for anyone with a personal story of the impact of this drought.  See this blog post for more details:  

And sadly we all get caught in the crossfire.

You know, it may be a bit unpopular to say, but for the majority of corn/soybean farmers, the drought of 2012 at this point will not have a lot of sever financial hardship associated with it.  Most have (or for sure should have) crop insurance, rising prices mean rising insurance payments if you didn’t raise a crop.  For the few folks having a normal year, rising prices mean above average income potential.  This sounds very wrong to even say, but unless the crop insurance companies go broke (something I lay in bed at night wondering), for most cash grain farmers, it’s really not looking like all that bad of a year financially.  Emotionally it’s awful, I don’t know a single farmer that does what he does so he can collect an insurance payment, its tough to put everything you have for the last several months into growing a crop, into giving it the best possible care, and watch it wither away, day after day, with little or no relief in sight.

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Corn picture from Indiana Farmer Brian Scott

But for this post I’m thinking of those financially impacted by the drought, there it’s a much sadder story.  I’m thinking of folks like this:

1)  The farmer who doesn’t have crop insurance, or doesn’t have the right crop insurance.  That may seem simple, but there’s numerous options when it comes to insurance.. (60%. 80%, harvest price option, trend adjusted yields, etc.)  I remember a few years ago we didn’t get the paperwork submitted quite right, and we didn’t have the insurance coverage I wanted.  It was ok, as we had a good year, and didn’t need the insurance.  The many, many thousands of dollars involved in whether you check a certain box or not makes me think of those farmers that for whatever reason do not have the insurance coverage they could have.

2)  The farmers with the saddest story to tell are the folks raising livestock.  The cold hard reality of the situation is this:  It appears like we do not have enough grain to feed all the livestock in this country until the 2013 harvest.  The ugly reality of that seemingly simple statement is that some livestock farmers are going to have to exit the business.  That is just sad, I don’t know what else to say.  What’s so hard is how completely out of an individuals hands it is..  The feed is simply not there, and the function of the market is to drive the price high enough that we reduce usage (a nice way of saying slaughter more animals) so that we do make it to the next harvest.

3)  A drought moves far beyond the farm gate though.  The local elevator is a perfect example.  There won’t be too many lines at ours this fall.  I doubt they will operate on extended hours, or hire much temporary help.  That sucks dollars out of the local community.  There’s the ethanol plants that will be going dark.  Political decisions will be made that determine whether it’s farmers here, farmers in Japan/Mexico, or ethanol production that shoulders more of the responsibility to cut back.  (Isn’t it sad that politics plays such a role in the ramifications of a drought?)  But one thing the politicians can’t do is produce grain, so someone, somewhere will get shorted, and for the businesses that do, the employees will feel it directly.

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Drought-stressed corn ear (once again Thanks, Brian!)

4)  The trickle down effect of all this is significant.  If there is less livestock, there is less need for truckers to haul that livestock, less need for vets to care for the animals, less need for the feed store, less need for the custom manure hauling services.  Ultimately a reduced livestock herd means we may have too many slaughter facilities in this country, and a few may be forced to close.  All of those directly involved in livestock in an area will see their paychecks cut, and have less money to spend in their rural communities.

One minor note.  Many may be thinking, we’ve survived droughts before, and that is true.  The last one of national significance was 1988, and we began 1988 with 50% of our corn usage already carried over from the previous year.  We begin this year with less than 10% carryover.  Going back prior to 1988, I hear comparisons to 1956 and than way back to the Dust Bowl years.  The agriculture industry has changed greatly since those times, and understanding how this all plays out is impossible at this point.  I am not an alarmist, food/fuel prices will go up, we will survive, very, very few will go hungry because of the 2012 drought.  But many folks, with a deep passion and love for agriculture, will find their farms, their jobs, and their future changed in ways that only happen in nightmares, and that is the sad reality of large-scale drought.

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17 responses to this post.

  1. I don’t farm for crop insurance and I have always felt that whenever I got a payment from crop insurance due to a crop loss I was limiting the potential for our farm. That said I use crop insurance as a risk management tool, I will gladly pay my premium every year and never have a loss if it means that I have protection from a single year destroying our farm. Perhaps you have things figured out on your farm where all the risks are eliminated in a drought year, most farms choose to take on more risk than that. In the end we all need to be able to sleep at night and have a few tools like crop insurance available to limit the amount of exposure we face in today’s volatile weather and market environments.

    Reply

    • I certainly don’t mean to suggest I have anything figured out, and income will certainly be down compared to a normal year, but we do have crop insurance (as do most farmers I know) and it does help tremendously on a year like this. That is why it is the livestock guys I really feel for… it is the markets job to force them to cut back, and the only way one does that is usually if their forced to financially.

      I get and support free markets and all that, it’s just hard to see the individual suffering that’s involved amoung livestock friends.

      Reply

      • Very true Darin, I feel for the livestock guys as well. They do have some insurance options available but they are very expensive and most choose not to purchase such coverage. Unfortunately because there is not an adequate safety net for them to fall back on when the risk gets to high to often a farm decides to quit raising livestock or raise them for a larger company shifting the risk onto them. This hurts the diversification that exist in agriculture and exemplifies the need for an adequate safety net for crop farmers that focuses past the traditional cash crops and not only looks to provided a safety net for livestock but also all the other fruit, vegetable fiber and ornamental crops out there that are not covered under the RAM policies.

  2. Hi, Darin. You and I have corresponded before. I’m an assistant professor of journalism at the University of Illinois. I’m very interested in finding and telling the stories of individuals who may be getting out of the business (crops or livestock) due to the drought. If you or any of your readers know of anyone, or know of someone who might know of someone, please pass my contact information on to them – stretch AT illinois.edu

    Thank you and good luck. I appreciate your blog.

    Reply

    • Thanks for commenting, and I like what you are trying to do there Stretch! I might drop a short note and see if there”s anyway we can help get those stories told

      Reply

  3. Don’t know if you have read The Black Swan by Nassim Taleb but it talks about these types of unpredictable events that causes massive shifts in reality. I believe this drought will be of them.

    Reply

    • I agree with that Judi. The widspread drought, the large demand base we had, combined with lack of carryover supplies could very well mean agriculture will look significantly different when this is over (which probably won’t be for several years)

      Reply

  4. So sad to read this, Darin. Helps those of us who don’t have farms understand the serious emotional and material consequences of this drought.

    Reply

    • Thanks so much for the kind words Aimee, and thanks for sharing as well. I wanted to makek clear how far reaching the effects are, not just the farmers that plant the crop.

      Reply

  5. I have a car. I invest money into my car, via maintenance, gas, monthly payments, and personalization. My car is fully insured. Now, I could squeeze some money out of that car if it gets totalled, and perhaps move on to the next car. At the same time, I’d earn my investment back through the continued use of a reliable automobile, especially after I’ve paid off the loan on it. I’d also have to cope with the heartache of losing that car, the disappointment of having to rely on insurance, etc.

    I guess what I’m saying is, crop insurance isn’t an answer. It’s a coping mechanism for the worst case scenario; no one hopes to total their car, and I know very few people who would survive an accident serious enough to total their car and say, “GOOD. I get to file a ton of paperwork and maybe not earn back my investment!” Crop insurance isn’t that different.

    It isn’t just the end profit. It’s the blood, sweat, and tears. It’s the dedication and the relationship between the car owner (farmer) and the car (the farm or individual field). It’s the inputs, it’s the admitting defeat, and so much more.

    I’m not really sure where exactly I’m going with this. I guess the bottom line, for me, is that crop insurance is a last resort. And moreover, crop insurance doesn’t put grain in the feed mills, it doesn’t put food on the store shelves, and it doesn’t nourish the body.

    Reply

    • Thank you for commenting Kelly. I think your thinking somehwat the same as when I talk about the emotional vs. financial issues that exist. While acknowledging the emotions, my post was about the wide financial impact that moves far off the farm.
      Thanks for stopping by!

      Reply

  6. […] Drought Happens Rate this:Share:Like this:Like6 bloggers like this. […]

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  7. Posted by Richard Wahl on July 21, 2012 at 11:59 am

    Darin, good comments. In our area of Kansas this (2012) represents at least the third year of severe drought. We have been focused on cattle and hay production so there is no insurance program of any consequence. Three seasons ago we planted 640 acres of cane feed and only harvested 80 acres. Last year we summer fallowed but collected very little soil moisture, the feed we planted was about knee high when it dryed on up and died. This year the feed came up finally about 10 days ago after a shower of about 90/100s but by now is pretty obvious it will soon die. There is no real safety net in this situation (no program crops with insurance). If we did not have off farm earnings, I would be out of here, much like the multitude of folks over the last 100 years or so, except this time it is tough back East as well. After a series of years, what ever fianancial reserves one may have had become depleted (equity in land) and unfortunately the stress of it can take its toll emotionally. Our salvation continues to be faith in God and that he will not allow more burden than can be handled through his Grace provided by the Lord Jesus. So we stay spiritually supported although the rest is lost.

    Reply

  8. […] And sadly we all get held in a crossfire. […]

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  9. Interesting POst. Thank You!

    Reply

  10. […] I’m not exactly the cowboy that Brandon wants me to be- but I’m getting closer! This year the drought and the Kansas heat created a lot of thirsty cows and horses. It didn’t take too long and Brandon […]

    Reply

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