Bloomberg News

Aid Welcomed by Drought-Stricken States Facing Crop Loss

July 12, 2012

Disaster Declared in 26 U.S. States as Drought Sears Midwest

Stunted soybean plants in Idaville, Indiana. Photographer: Daniel Acker/Bloomberg

State leaders welcomed a pledge of U.S. aid for the worst drought in decades, even as the assistance paled in comparison to potential losses and a forecaster said weather conditions may not improve in some areas until September.

The U.S. Department of Agriculture yesterday named 1,016 counties in 26 states natural-disaster areas, the agency’s biggest such declaration ever. Substantial rains that would relieve the worst-hit areas may not arrive for months, said Mike Pigott, meteorologist at Accuweather Inc.

“When you are one of the biggest agricultural-producing states in the nation, a monumental drought causes enormous losses,” said Bryan Black, a spokesman for the Texas Department of Agriculture. “The disaster-relief assistance from USDA will help Texas farmers and ranchers recover from devastating losses.”

The federal action makes farmers and ranchers eligible for low-interest loans to help weather the drought, wildfires and other disasters. The projected cost to the federal government is about $4 million as loans are ultimately repaid, according to Agriculture Secretary Tom Vilsack. Still, with a budget-cutting farm-policy bill going through Congress and prospects for other disaster aid slim, officials say the low-cost loans and reduced penalties for grazing livestock on land set aside for conservation announced yesterday are better than nothing.

Mother Nature

“Farmers and ranchers are at the mercy of Mother Nature,” Kansas Governor Sam Brownback said in a statement. The state “will continue working to make sure farmers and ranchers have access to the resources they need to cope with crop losses and impacts on livestock.” Kansas was the seventh-biggest farm state in 2010, producing $8.2 billion in crops.

Moderate to extreme drought now covers about 53 percent of the Midwest, the country’s main region, fueling price gains that are the biggest this year among the 24 commodities tracked by the Standard & Poor’s GSCI Spot Index. The rallies are boosting costs for companies from McDonald’s Corp. (MCD:US) and Coca-Cola Co. (KO:US) to Archer Daniels Midland Co. (ADM:US) and Smithfield Foods Inc. (SFD:US)

The area covered by the declaration includes most of the Southwest, which has been affected by wildfires, as well as the Southeast and the southern and eastern parts of the Corn Belt, mainly Illinois and Indiana. Iowa, the biggest U.S. producer of the grain, is not included.

‘Building Heat’

The drought, which may be the worst since a 1988 dry spell that caused $78 billion in damages, is “beginning to have an impact on the corn crop in parts of the Midwest,” Pigott, whose company is based in State College, Pennsylvania, said in an interview. “The building heat and humidity could affect maturity and eventual production.” Corn and soybeans are the two biggest U.S. crops.

Central Illinois, Indiana and Ohio are expected to remain under severe drought, which may worsen as July continues. Parts of Arkansas, Missouri and southern Illinois have been “substantially affected,” he said.

Some southern areas are experiencing multi-year droughts, including Texas, where all 254 of the state’s counties are covered by the declaration. Texas grows more cotton than any other state.

‘Limited Tools’

The USDA is also changing procedures to allow disaster claims to be processed more quickly. The steps taken by the USDA are among the “limited tools” the department has available to agricultural producers with drought, Vilsack said.

The secretary called on Congress to pass a five-year reauthorization of all agricultural programs before Sept. 30, when current authorization expires, to enhance the department’s ability to help farmers and ranchers in times of need.

Congress needs “to have that bill come to the floor and be voted on,” Vilsack said. The Senate approved a half-trillion- dollar plan last month. The House Agriculture Committee spent yesterday considering its version of the bill.

Democratic Representative David Scott of Georgia said farmers aren’t helped best by “throwing money at the problem,” saying attention to long-term agricultural issues such as keeping small farms profitable are more important. “Some of the farmers are really struggling,” he said in an interview. “We need to use our resources effectively.”

Heart Break

Representative Vicky Hartzler, a first-term Republican from Missouri and member of the agriculture committee, said farmers affected by the drought will rely on existing programs for aid.

“It breaks your heart to see what’s happening,” said Hartzler, whose family farms 2,000 acres. Still, “that’s why we have crop insurance, to help with these times,” she said in an interview.

The declaration covers counties in the following states: California, Oregon, Nevada, Utah, Arizona, New Mexico, Colorado, Nebraska, Wyoming, Kansas, Oklahoma, Texas, Louisiana, Arkansas, Missouri, Kentucky, Tennessee, Illinois, Indiana, Alabama, Mississippi, Georgia, South Carolina, Florida, Delaware and Hawaii.

To contact the reporters on this story: Alan Bjerga in Washington at abjerga@bloomberg.net; Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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