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Drought to further hinder protein sector

This year’s growing season was being compared to the drought of 1988, but as Michael Scuse, USDA undersecretary for Farm and Foreign Agricultural Services, made several stops in Michigan to meet with agricultural leaders and growers in mid-July, the consensus was it’s even worse.

On the Onondaga farm of Michigan Agri-Business Association President Jim Byrum, the damage was evident, as corn was shriveled and brown, and struggling to tassel. What was green was curled tightly into survival mode. “The damage has already been done.” Even with the rain that moved through Michigan right after this event, he says, “There will be yield loss.”

Key Points

• Drought’s impact will challenge protein sector of agriculture.

• Five disaster programs expired Sept. 30, increasing the need for a new farm bill.

• In U.S., 60% of land is dry; 1,000 counties have been declared disaster areas.

Scuse has been touring several states to assess the damage, where 60% of the country is dry and 1,000 counties to date have been declared disaster areas.

Scuse, who farms 1,700 acres of corn, soybeans and wheat with his brother in Delaware, says, “I understand it’s particularly devastating for Michigan growers who have already taken huge hits with fruits and vegetables — some of them not offered under crop insurance,” Scuse says. “I understand the economic toll it will take, and not just on farmers, but also agribusiness and other supporting industries. This is a learning process for us in trying to determine what we can do to make things better, not only this year, but going forward.”

The protein sector is primed to be hit hard as feed prices will inevitably increase dramatically. Paul Anderson, chief credit officer with GreenStone Farm Credit Services, says protein markets are poised to go through the woodshed. He predicts livestock herds in the West will thin out first because they tend to buy more of their feed.

“For cattle, it looked like it would be a break-even year, or maybe make-a-couple-hundred kind of year, but with this drop in available corn silage, it’s going to be a challenging year,” he says. “The poultry market was just bouncing back, and now with high corn prices, it’s going to be challenged again.”

Adding to the frustration is the loss of five disaster programs that expired Sept. 30, increasing the need for a new farm bill.

Scuse says, “We need a farm bill, and we need one sooner rather than later. We need a livestock indemnity and disaster program so we can get assistance.”

However, while it’s not going to help the livestock industry, Anderson noted a difference from the 1988 disaster — wider acceptance of crop insurance and the safety net it provides. Another difference is farmers today have stronger balance sheets than they did at that time. “And we have cheap money, and that’s the only redeeming part of this scenario, but debt is debt,” Anderson says. Interest rates are also lower, he notes.

To help producers, Scuse says USDA has trimmed the average 89 days to declare a disaster area by lifting the requirement for a request from the governor. Also, the emergency loan interest rates are now 1% below current loans with a cap of 3.75%.

Scuse also noted that in the past, there was a 25% reduction on rental rates on Conservation Reserve Program land being used for hay or graze. The reduction has now been reduced to 10%.

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ASSESSING THE DAMAGE: USDA Undersecretary for Farm and Foreign Agricultural Services Michael Scuse visits with Gary Haynes, who farms the ground of Jim Byrum in Onondaga.

This article published in the August, 2012 edition of MICHIGAN FARMER.

All rights reserved. Copyright Farm Progress Cos. 2012.