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US drought takes toll on farmers

Updated: 2012-08-06 09:12
( Xinhua)

WASHINGTON - Dennis Boogards looked sad and helpless when he stood by his sun-scorched 1,000-acre farm of corn and soybeans. The crops were half dried or barely growing, but there was still no sign of rain.

After a rainless July coupled with daily heat at 95 to 105 degrees Fahrenheit, the family farm owner in the US Midwest state of Iowa now expects a harvest of merely 70 to 80 bushels per acre on the corn field, instead of the past average of 180 to 220 bushels an acre. His biggest wish right now is to see more rains in August, which can help fill out the soybean pods and stem the loss.

"See? The kernels are starting to dry up on this corn plant," Boogards told Xinhua in a recent interview, pointing to the plant he just pulled out of the field. "If we don't get any more rains, we will continue to see the kernels get smaller and continue to dry up."

Turning to a soybean plant, he added: "If it continues to dry, these flowers will dry up, shrivel and fall off. August is the most important time for bean pods to be filled. They really need moisture and not a lot of heat during August."

"Days ago I saw a cloud coming with heavy shade. I took a glass of beer and sat here waiting to celebrate, but the shade just stopped before me and moved away," recalled Boogards, a bitter smile on his face.

Iowa is reputed as a "God-chosen" farming state, where extra investment in irrigation is seldom needed. Before this drought- haunted crop year, it had experienced five straight moisture years, as well as 24 consecutive years free of drought.

"In fact in Iowa, we have only about 0.5 or 1 percent (of farmland) that is irrigated. So it depends on rainfall which comes almost every year," Iowa Agriculture Secretary Bill Northey told Xinhua.

Presently, however, not only Boogards' farm is in desperate need of rain, so are the farms in 42 out of the 99 counties in Iowa. Similar situation is seen in another 1,410 counties in 31 other states across the country. They represent 50.3 percent of the overall land of the continental United States, a record proportion unseen in more than 50 years, according to the latest report by the US Department of Agriculture (USDA).

Iowa may not be the worst-hit area, but it matters. Known as the "Food Capital of the World," the state straddles on the Corn Belt, and leads the nation in production of corn, soybeans, pork and eggs. It is also a major producer of beef and chicken.

The state exports 7 billion dollars worth of farm products to China each year, half of which are soybeans and the other half corn, pork and beef.

Food cost driven up

Although it is hard to estimate the exact loss from the drought, as many crops are still in the growing season, there is little doubt that the overall US agricultural production will be reduced for the current crop year.

The USDA said the drought, along with heat, has now affected 88 percent of the corn crop. It cut its corn yield forecast to 146 bushels an acre for the year, the lowest level since 2003.

The news spooked consumers and invigorated investors. December corn futures on the Chicago Board of Trade, or the most active corn contract, went up to 7.96 dollars per bushel, over one dollar higher than a month ago.

With the prices shooting upward, it may not be a nightmare for corn planters to see yield losses, since they can be compensated more handsomely. But the fact is they usually sell ahead of time, which means part of their crops have been sold months before harvest at a lower price, and now they are at a risk of overselling because of the unexpected output shrinkage.

It could be worse for producers of meat, poultry and dairy products, because corn is a staple of animal feed. Some livestock producers in Iowa told Xinhua that they have sold off cattle for slaughter and are just keeping some healthy milk-producing cows, because the corn feed price has skyrocketed to 8.5 dollars a bushel from 5.5 dollars three months ago. Some of them even early harvested corn crops and alfalfa for feed, for fear that the plants might soon lose nutrition due to the continuous drought.

Industry experts say that in the short term, the oversupply might lead to a drop in meat prices, which further squeezes the industry's profits. Several months later, however, depressed meat, poultry and dairy products prices may start to leap upward.

The USDA forecast that the prices may rise 4 to 5 percent for beef next year, 3.5 to 4.5 percent for dairy products, 3 to 4 percent for eggs, and 2.5 to 3.5 percent for pork.

Global impact

Statistics show that Americans spend just 13 percent of their household budgets on food, so at the current stage, rising food prices may only have a modest impact on the broader US economy or overall inflation, which has been running around two percent annually.

But the United States is a major exporter of a wide variety of agricultural products. Price hikes at home may have a far greater impact abroad, and the poor and the vulnerable in foreign countries are expected to bear the brunt of it.

"Any country that trades feels the global prices," Iowa State University Professor Bruce Babcock told Xinhua. "Some African countries use corn as a staple in their diet. They're gonna see prices increase substantially, more than the United States."

Although the United States has no intention to discourage farm products export, there is going to be a battle for corn in the world market, especially between the US domestic livestock and ethanol industries and the foreign importers.

Given the reduced quantities of corn yields, whoever wins the battle will make others suffer, and the price of corn is going to be elevated around the world, said market analysts.

In Babcock's view, the US government does not really have any tools available to reduce the price of corn. The only policy lever that is available, he said, is perhaps the government could waive the ethanol mandate to help bring down corn prices.

"We obtain 10 percent of our gasoline supply from corn ethanol, so the government could take steps to minimize the amount of corn that goes to ethanol. That's really the only emergency measure the US government has right now," he explained.

Under the Environmental Protection Agency (EPA)'s Renewable Fuel Standard, US refineries are required to blend their gasoline with a certain percentage of biofuel each year. The policy aims to reduce US dependence on imported oil, but also consumes a lot of corn.

It may not be a big deal in the past when corn supply was ample. But this year, some analysts say as much as 40 percent of the corn crop could be used to produce around 13.2 billion gallons of ethanol under the mandate.