Drought Packs Punch On Protein Sector; Feed Prices Destined To Climb

Even with recent rains, ag leaders tell USDA Under Secretary for Farm and Foreign Agricultural Services that Michigan has yield loss.

Published on: Jul 19, 2012

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

On the farm of Michigan Agri-Business Association President Jim Byrum in Onondaga, the damage was evident, as corn was shriveled and brown and struggling to tassel. What was green was curled tightly and into survival mode. "The damage has already been done," Byrum says.

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

Even with the rain that moved through Michigan this week, Byrum says,"There will be yield loss."

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."

Jim Byrum
Jim Byrum

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."