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Drought creates crop uncertainty into next year

The Harlan County Reservoir lies parched in drought on August 25, 2012 near Alma, Nebraska.

Today the U.S. Department of Agriculture puts out several reports, its last of 2012. The year's been a tumultuous one as drought swept the country.

But drought made this year the second highest on record for farm income, and also the second highest for revenue from exporting U.S. crops -- because the crops that did get to market got a higher price.

The USDA expects feed corn to sell at $7 or $8 a bushel, a high price, but also a wide price range. That swing of a dollar in price is adds another layer of uncertainty for food companies and meat producers.

"Think of what it would cost a meat processor for a full year at those different prices," says Morningstar analyst Ken Perkins.

Since no one knows what feed will cost, meat costs will be unpredictable into next year, too, he says. Despite the higher prices, U.S. farmers do not want another year of drought or low yields. If they continue to produce less corn, soy and wheat than expected, other countries will pick up the slack.

If no one else can make up the gap in U.S. production, that will drive up prices in the global market, says Darin Newsom at DTN Financial. And he doesn't like the weather he's seeing so far this season.

"We are heading into the winter in a worse drought situation than we were last year at this time," Newsom says.

A dry winter means crops start with less nutrient-rich topsoil in spring, and then who knows what summer will hold. Usually December is a pretty boring time for farm reports. Not much is growing, after all.

But in this environment, Newsom says, every indicator gets watched more closely.

About the author

Eve Troeh is News Director at WWNO-FM in New Orleans, La., helping build the first public radio news department in the station’s 40-year history. She reported for the Marketplace Sustainability Desk from 2010 to 2013.
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Just as we know that drought will continue......because of global warming you know.....the American people can now feel good about subsidizing through taxpayer money these midwest global agri-businesses that plant year after year knowing that drought will take most of the crop. These farmers are going to make more with the losses with this new Farm Bill then if they had a crop that was successful.

So, rather than send Farm bill money to develop areas to the north that will have the weather to harbor agriculture, your pol thinks subsidizing all the crop losses on ground already exposed to drought is the better approach. Forget these crops that aren't corn or soy......these pols are committed to keeping the taxpayer wealth in these families.

Corporate Third Way Democrats are not able to legislate for what is best for the country. When profit is the goal, all things that act as cost goes out the door. To change this policy......vote for pols that shout loudly against corporate profits!!!

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