The Drought of '12 Makes Winners and Losers

Hoosier Perspectives

There is opportunity amongst the disaster for those in the right place at the right time.

Published on: September 3, 2012

Maybe you got the rains everyone dreamed about and few people received. Perhaps your corn will yield 175 bushels per acre. If you didn't forward contract any of it, you're obviously a winner this year. You have corn, but a large portion of the farmers in the country have less corn than they like.

Maybe you still have old corn in the bin. Obviously if you sell it now, and it wasn't already sold on contract, you're a winner. Or maybe you use it to fill a contract that you made for the new crop and won't be able to fulfill. Does that make you a winner, or less of a loser?

The line may be blurred this year. Crop insurance will help equalize incomes, and some people may wind up as well or better off than if everyone in the country harvested 170 bushels per corn per acre. But it goes against the grain not to harvest corn, and to have to rely on a check to make you whole, or at least fill up part of the financial void.

Then there are some who didn't have crop insurance. The worst possible scenario is someone who didn't have crop insurance, has 40 bushels per acre, and forward contracted 75 bushels per acre at $5.50 per bushel. That's a tough one which may take time to dig out from.

In the midst of all this, there may be opportunities to capitalize for those who have the right resources. Consider the farmer who made excellent second crop hay, albeit it a limited amount, and has beef cattle. He could sell the hay at a high price to a dairyman and buy grass hay at half the price for his beef cows.

Then there are a few guys actually buying cows instead of selling them. They are picking up cows form neighbors who are out of pasture, and are piling up silage or putting it in bags. It's corn that would have made 20 bushels per acre. Their reasoning is that they will collect the insurance, feed the silage to the cows instead of selling the paltry grain crop, and hold onto the cows until cattle prices rise die to sell-off. The theory makes sense since we already have the lowest cow inventory since the 1950's, or the lowest in history, depending upon whom you listen to, and many people still uncertain about how many cows they can carry through winter.

It's a year to sharpen the pencil, evaluate every opportunity constantly, and do what makes the most sense at the time. Hoosiers are good at surviving tough times because we know how to work hard and apply common sense. This coming year, in the aftermath of a drought which will take its place in history as one of the worst ever, will be tougher for some to survive than others. Think about and pray for those who didn't get the rains you did if you're harvesting decent crops, and keep your chin up if you're the guy with no crop insurance, crummy corn and a forward contract to fill. After all, there but for the grace of God goes all your neighbors.

One way or another Hoosiers will get through this crisis. We will plant a crop in 2013.