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.

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.

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.