Drought and heat stress cuts yields. Farmers will have less to harvest but crop insurance will help them out and keep them going. Crop prices will be high so farmers will actually have a good year.
If you find such a simplistic description of this summer's situation in your local newspaper meant for urban audiences or even in material for farmers, you need to write a letter to the editor and set the record straight. The impact of the drought will continue long after the crop is harvested, such as it is. The impact will be minimal on some farms, but nearly catastrophic on others. Local businesses, like elevators that depend upon handling grain for income and equipment dealers, and livestock producers who must have reasonable feed costs to survive, will all be impacted. That's closer to the truth about the far-reaching impact of the 2012 drought.
Here are just two examples. They are based on real situations.
One family has not carried crop insurance and didn't have it this year. They have soil types that normally produce a decent crop in either wet or dry seasons- until this year. They've already told their children that they need to park their 'wants' list for the year ahead and only come to their parents with absolute needs.
Fact: Not everyone has crop insurance. In fact, the national average for acres insured (corn) is 85%. The estimate in Indiana is 75%. Chris Hurt, Purdue University ag economist, says some of that percentage represents the most basic CAT coverage, sometimes required before lenders will loan money. It will help repay some inputs, but won't make up for losing a crop. Only about 65% of soybean acres are insured.
Fact: Not everyone will participate in high prices, should they persist. That's because some people, pushing their pencil like they should and pulling the trigger when they could lock in what seemed like a good profit, sold corn in the $5 to $6 range for forward contract delivery. Now, they're not sure whether they will even have enough corn to fill their contract, let alone have the opportunity to sell extra corn at possibly higher prices.