Farmers and ranchers nationwide have borne the brunt of the economic impact from this year’s historical drought impact, the worst on record since the Great Depression, and have been forced to sell cattle in order to prevent deeper than expected losses for 2012. While the Farm Service Agency is helping America’s livestock producers with short term assistance to help provide additional grazing areas and water to hard hit producers, the rain has come too little and too late for corn producers nationwide. Brian Fuchs, a climatologist with the National Drought Migration Center at the University of Nebraska painted a bleak picture of our current drought across the U.S., saying, “This week we saw a decline in drought in the lower 48 states for the third week in a row, but the decline was small. Last week covered 62.46 percent of the area, and this week 61.77 percent was in drought.”
The current drought is forcing grain prices higher worldwide. Soybeans are up $4.00 per bushel since May, closing today at $17.03 on the New York Mercantile Exchange (NYMEX), while corn and wheat are up about $2.50 a bushel during the same time frame, with corn closing at $8.15 a bushel, and wheat closing at $8.79 a bushel. With diminished yields, less productive acreage, and many farmers devoting their entire corn crop to grain for livestock feed, ethanol is expected to become more expensive in 2013, further driving up manufacturing costs nationwide. The price of ethanol has risen to the point where the price spread in futures between ethanol and gasoline is close to a historic low, with gasoline futures closing on the NYMEX today at $3.03 a gallon, while ethanol closed at $2.62.6 a gallon. The United States Department of Agriculture is expecting for food prices to rise nominally throughout the rest of 2012, and into 2013 with an average increase of 3% to 4% across all food categories.
As the drought started affecting states earlier this spring, Democrats and Republicans in both houses of Congress dragged their feet towards a long term agricultural plan for our nation that would separate the funding of the Supplemental Nutritional Assistance Program, better known as the food stamp program, from programs that were directed solely to agriculture related programs. With the U.S. House of Representatives considering legislation to reduce spending by $35.1 billion dollars over ten years, the U.S. Senate chose to hold the line on spending cuts by approving a plan that calls for a more modest $23.1 billion dollars less in spending over ten years. As House leaders were unable to assemble enough votes to pass their own legislative body’s long term farm legislation, representatives in the House approved a $383 million dollar drought relief bill to help ranchers and farmers hit hard by the drought, and shortly thereafter Congress recessed before the measure could be brought before the full Senate.
Cattlemen and ranchers are wanting Congress to take a slower approach on current long term farm bill proposals, as both Senate and House versions distribute about 80% of the overall cost as part of the food stamp program. This was a big reason why the full House has not taken up consideration of a major farm bill, and instead opted for the less expensive and less divisive Agricultural Disaster Assistance Act of 2012. News travels fast in Washington, D.C., and immediately after the House voted on the ADAA, Senate Democrats made it very plain that they intended to hold this drought relief measure hostage to their intent to avoid any significant reductions to the food stamp program. Democrat Senator Debbie Stabenow from Michigan, chairwoman of the Senate Agriculture Committee, and author of the Senate’s version of the 2012 farm bill, went to the Senate floor to announce that she was blocking consideration of the House emergency drought relief legislation. Senator Stabenow said that instead of taking up the House drought legislation, “lawmakers would instead work informally over the August recess to try to put together a new measure to present to Congress when it meets in September.”
Republican senators were outraged that the Senate would adjourn before a vote could be taken on the House emergency legislation. Sen. Roy D. Blunt (R-MO) said, “The idea that we would decide that we would put this off another month,’ he said, ‘that we can put these families in jeopardy for another month, not knowing what their solution is, just seems to me to be totally unacceptable”. Sen. Pat Roberts (R-KS), Ranking Member of the Senate Agriculture Committee said, “critical assistance to the nation’s livestock producers devastated by historic drought conditions was ignored by Senate Democrats for partisan gain. I am outraged the Senate Democrats left town without even considering the House passed disaster package. They are playing politics with a devastating drought. Make no mistake – the consequences of Senate inaction on this historic drought will not only be felt at home in Kansas, they will be felt in rising food prices at dinner tables across the nation”, said Roberts.
With the Mississippi, Ohio, and Missouri rivers now becoming less navigable, due to lower water levels, transportation prices for grain and other commodities are also expected to increase, as more food supplies must be transported by truck as opposed to by barge. Transportation costs make up approximately 86% of all food costs, and with more food suppliers competing for fewer available trucks, shipping rates in the United States could see a higher than anticipated increase in the first and second quarter of next year.
It appears that members of Congress are content to begin their annual county fair speaking tours without resolving the majority of the agriculture issues still on the table. For the small to medium sized farmer, has this delay in Congress come too late for some? Finally, is Congress willing to come back early and try to work out their differences quickly to bring real drought relief to farmers who have been hit the hardest?