NC to feel effects of drought
by Kellen Moore
More than 53 percent of the country is now in moderate drought or worse, according to the U.S. Drought Monitor report released Thursday. The figure is an increase from the previous week and represents the highest levels since the Drought Monitor started in 1988.
In the Midwest " the Corn Belt of the United States " more than 72 percent of land is currently experiencing moderate to exceptional drought.
The result is lower yields per acre of corn and soybeans and therefore higher feed prices for livestock producers.
Part of the problem we're facing is that weather conditions were so good at the beginning of the season that farmers got in the field early, Secretary of Agriculture Tom Vilsack said in a briefing Wednesday. And as a result, this drought comes at a very difficult and painful time in terms of their ability to have their crops have good yields.
The problem may seem a world away, but the rest of the United States will soon feel its effects through food prices.
Customers may see lower prices on beef, poultry and pork in the short term, as livestock producers reduce their herds to deal with higher feed costs, he said.
But over time they will rise, Vilsack said. We will probably see those higher prices later this year, first part of next year. Processed foods (are) obviously impacted by crop yields, and we will likely see the increase of that also in 2013.
Ricky Volpe, a research economist with the USDA, said in an email Friday that all animal-based products could see impacts within two to three months.
Look for chicken, turkey, fluid milk and eggs to show the earliest impacts, Volpe said.
Consumers should not see any price increases now as a result of the drought.
I think the most important thing right now is for consumers to be aware and to keep an eye on it and begin asking questions, Vilsack said. If they see a dramatic increase in hamburger costs or steak costs, they should ask, What's with this?' And if someone says it's the drought, they should push back and say, Now, wait a second, that's not the reason.
This obviously is not the first time American farmers have suffered drought, and there are some safeguards in place for such situations.
Farmers can purchase crop insurance, which covers a portion of lost crop value, and the federal government recently lowered interest rates on emergency loans to farmers in disaster areas. That was coupled with a streamlined process for making those disaster declarations more quickly.
But it's the livestock producers that are in the biggest and most troubled situation because they simply don't have any disaster program, and there's no such thing as a crop insurance program for livestock producers, Vilsack said.
Cue North Carolina, the nation's second-highest producer of hogs and the third-highest producer of poultry.
Deborah Johnson, CEO of the N.C. Pork Council, said feed accounts for about 60 percent to
70 percent of the cost of bringing a hog to market. Most hog feed is corn-based, while most poultry feed is soybean-based, she said.
We're already seeing the markets react in terms of corn, she said.
A bushel of corn at the end of June was $6.35 per bushel, she said. This week it rose to $7.95 per bushel.
The pork industry cannot pass those costs immediately on to consumers, because they are limited by what the plants will pay, she said.
So, what will end up happening is the corn will get so high that some of our farmers will say, OK, I'm going to stop breeding hogs because I can't afford to do this, Johnson said.
That lower supply without lower demand will lead to higher prices.
While the predictions are gloomy, the nation now must wait to see how weather patterns change in the coming weeks and what the final yields will be.
Climate experts aren't holding their breath.
The dryness and heat wave pattern are still locked in, said Brian Fuchs, a climatologist at the National Drought Migration Center. The latest forecast says this isn't changing. This could easily go on into September.