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August 13, 2012
What the Drought Will Mean to You
For more information on Newsline, contact: Johnna Miller, Director of Media Development, American Farm Bureau Federation johnnam@fb.org
You’ve probably seen the map showing the widening drought as a growing red blob spreading across the country. But what does that mean for you? American Farm Bureau Economist Todd Davis tells you in this report from AFBF’s Johnna Miller.
| Miller: | The Department of Agriculture recently released their first survey-based crop report and it shows just how bad the drought is hitting the nation’s farm fields. American Farm Bureau Economist Todd Davis has seen the impact first hand. |
| Davis: | It is very devastating. It’s worse than the ’88 drought. The psychological and emotional aspect is that, as a farmer you invest all your money up front on feed and inputs and you don’t have a chance to get any money until harvest time and so it’s very emotional, very sad and frustrating to see this labor of love wither away and die in the field and you see that all of your financial investment wither away and die with it. |
| Miller: | Davis says those with crop insurance will be able to cope, but he compares it to your home burning down. Even if you have insurance, it’s still a big loss. |
| Davis: | It’s a big deal. The drought has had a large effect on the corn crop. The yield estimate Friday was 123 bushels an acre. And that’s about a 26 percent yield loss compared to what they thought it would be earlier this spring. Soybeans also are looking to have the smallest crop since 2003, but a timely rain might increase yield. That’s not the case for corn. The corn yield is pretty much set in stone and we’re looking at a substantially smaller crop this year. |
| Miller: | Davis says those who raise animals are already feeling the drought’s effects. |
| Davis: | This is a big deal for meat, dairy and eggs because when you see the rising commodity prices, that translates into higher costs for the feed these animals eat and a lot of these producers, especially the beef cattle producers in the southern plains have experienced drought for two consecutive years. So they’re low on feed , hay and forages and they’re going to be paying more this year and so they may choose to scale back their production. |
| Miller: | Davis says initially that will mean cheaper meat prices as farmers and ranchers sell off their animals because they can’t afford to feed them, but other ripple effects may not be what consumers would expect. |
| Davis: | As far as your cereals or bread or your flour, you really won’t know the value of the drought until harvest is underway. And that’s still a couple of months away. It will take a while for this effect of the drought to trickle through the marketing channels and get to the consumer level. So you might see higher corn flake or Wheaties costs next year but as opposed to eggs and dairy and meat prices, you’ll probably see them later this fall. USDA has released a study where they say the increase in commodity prices will only increase retail prices by about 15 percent and it really depends upon the product. If there’s a lot of processing involved there are a lot more costs involved in this product than just the value of the commodity. There’s a lot of marketing. There’s a lot of processing, a lot of transportation, a lot of energy costs that are included into a product. |
| Miller: | Johnna Miller, Washington. |
| Miller: | We have two extra actualities with AFBF Economist Todd Davis. In the first extra actuality he talks about the cure for high grain prices. The cut runs 20 seconds, in 3-2-1. |
| Davis: | The cure for high prices is high prices. South America is entering springtime and they’re going to see these fabulous corn and soybean prices and they’re going to plant fencepost to fencepost and these price potentials will remain when the U.S. gets ready to plant next year. So all we need is , Mother Nature on our side, a bountiful harvest and we will have lower prices. |
| Miller: | In the second extra actuality Davis talks about the potential impact of the drought on Congress. The cut runs 21 seconds, in 3-2-1. |
| Davis: | I’m sure they’re getting an earful. They have a disaster bill and the farm bill to work on so that does await them when they return to Washington. And so maybe , after talking with their constituents, they will return to Washington with a new focus and extra vigor to try to get something done to provide some policy certainty to producers so they can move forward and try to rebuild after this drought. |
| Miller: | Newsline is updated Mondays and Thursdays by 5pm Eastern time. Thank you for listening. |