Friday, August 3, 2012

Corn belt drought—another week without rain

We got rain again last night here just south of St. Paul.  If this keeps up, the farmers around here will be suffering survivor's guilt.  Because those Iowa corn crops we saw last week that were "just going to make it" if they got rain soon, didn't get the rain.  As you can see by the map below the area we visited last week is now listed as D3 Extreme.

Half of US counties now considered disaster areas

By JIM SUHR | Associated Press  Aug 1, 2012

ST. LOUIS (AP) — Nearly 220 counties in a dozen drought-stricken states were added Wednesday to the U.S. government's list of natural disaster areas as the nation's agriculture chief unveiled new help for frustrated, cash-strapped farmers and ranchers grappling with extreme dryness and heat.

The U.S. Department of Agriculture's addition of the 218 counties means that more than half of all U.S. counties — 1,584 in 32 states — have been designated primary disaster areas this growing season, the vast majority of them mired in a drought that's considered the worst in decades.

Counties in Arkansas, Georgia, Iowa, Illinois, Indiana, Kansas, Mississippi, Nebraska, Oklahoma, South Dakota, Tennessee and Wyoming were included in Wednesday's announcement. The USDA uses the weekly U.S. Drought Monitor to help decide which counties to deem disaster areas, which makes farmers and ranchers eligible for federal aid, including low-interest emergency loans.

To help ease the burden on the nation's farms, Agriculture Secretary Tom Vilsack on Thursday opened up 3.8 million acres of conservation land for ranchers to use for haying and grazing. Under that conservation program, farmers have been paid to take land out of production to ward against erosion and create wildlife habitat.

"The assistance announced today will help U.S. livestock producers dealing with climbing feed prices, critical shortages of hay and deteriorating pasturelands," Vilsack said.

Vilsack also said crop insurers have agreed to provide farmers facing cash-flow issues a penalty-free, 30-day grace period on premiums in 2012.

As of this week, nearly half of the nation's corn crop was rated poor to very poor, according to the USDA's National Agricultural Statistics Service. About 37 percent of the U.S. soybeans were lumped into that category, while nearly three-quarters of U.S. cattle acreage is in drought-affected areas, the survey showed.

The potential financial fallout in the nation's midsection appears to be intensifying. The latest weekly Mid-America Business Conditions Index, released Wednesday, showed that the ongoing drought and global economic turmoil is hurting business in nine Midwest and Plains states, boosting worries about the prospect of another recession, according to the report. more
The reason this drought is so serious is because humanity no longer keeps a 90-day food supply on hand.  This is Just-In-Time thinking brought over into agriculture from manufacturing.  But the story of Joseph is that when the seven lean years follow the seven fat ones, it is a very good idea indeed to have food reserves.

And the time has come to give up on the ethanol-from-corn idea.  To my farmer friends all I can say is:
  • The only reason you supported ethanol is because you wanted another market for your products.  Trust me on this, you won't have to worry about having a market for food ever again.  Your problem is—How must I redesign my farm to survive the new climatic reality?

A Worrying Trend In Global Grain Supply

Gregor MacDonald, | Aug. 1, 2012

From 1981 to 2001, the average days supply of global grains stocks was 105 days.

But, from 2002-2012, the average days supply fell to 73 days.

This goes along way to explain the transition to higher grains prices.

And, the shift mirrors similar conditions and forces at play in other natural resources, from oil to copper.  more

This article is older but it makes a good point: This drought will have repercussions for a long time.  Part of the problem in Iowa and Illinois (and probably other places) is that it was dry last year so the ground started out moisture deficient.  Droughts tend not to be one growing season events.

For those who mistakenly believe that agriculture is a small actor in the economy so what happens in Iowa won't affect them keep in mind one inescapable fact—if you eat, you have an interest in agriculture if only because it affects the price you pay for food.

The reason you don't usually have to think about agriculture is because for quite awhile now, the people who grow our food are so good at it, our food appears in our stores as if by magic.  Well, it's not magic—it's hard work.  And a LOT of cooperation from mother nature.  Now that we have made it so that every weather event will demonstrate that we have captured more energy in our atmosphere, that cooperation of mother nature is less assured than it used to be.

2012's Double-Whammy Of Bad Weather Could Slam Midwest Economies For Years

Mamta Badkar | Jul. 19, 2012

Images of dry, cracked grounds, yellowing corn leaves, and cattle suffering under the extreme weather conditions have permeated the press.

Over 70 percent of the Midwest was in some stage of drought in the week ending July 17, according to the Drought Monitor,

Jim Byrum, president of the Michigan Agri-Business Association, says the lower corn crops have already pushed farmers to more aggressively plan for wheat this year and the next.

What's more, with corn yields perishing, livestock feed is going to get expensive and many livestock feeders will eliminate breeding herds. Byrum says many will choose to take their sows to the market instead, and rebuilding the breeding herds will take time.

Earlier today, Morgan Stanley's Hussein Allidina wrote that the feed reduction would cause the largest-ever decline in livestock herds. He wrote that cuts in feed demand would see a 60 percent year-over-year (YoY) reduction in chicken production, a 48 percent reduction in cattle, and a 40 percent reduction in pigs.

Michigan had an unusually warm March this year, which caused the fruits to bloom early and get destroyed by April frost, said Tim Boals, Great Lakes Regional Manager for Wilbur-Ellis. This ruined cherries, apples and peaches that grow in the region.

Naturally there was some optimism for the commodity crops, namely corn, soybean and wheat, said Byrum, but it wasn't to be.

There are spots of Michigan that haven't seen rain in 45 - 60 days and there's been a 50 - 70 percent reduction in some corn fields. The sporadic rain that has come through the last couple of days hasn't done much. "Even if we get a quarter inch of rain, its gone immediately with this heat," said Byrum.

The extreme weather has already pushed farmers to chop their corn for feed, and many are concerned they won't be able to make their grain obligations.

"I've been in this industry a long time. We saw some droughts in the 1990s, 1998, but this is unprecedented, I have never seen it look this bad." more

1 comment:

  1. Another point worth bearing in mind here is that to a very large extent agriculture has been 'financialized' over the past twenty years, meaning that it is only a matter of time before hedge fund managers get their hands on the real property that backs up the futures contracts, hedges, and and large mortgages taken out to feed the 'land bubble' shown at and other sources