The Salt
12:39 pm
Wed July 25, 2012

Meat Producers And, Ultimately, Consumers Hurt By Drought

Originally published on Thu July 26, 2012 3:13 pm

Despite headlines about the crushing drought that's afflicting much of the country's prime agricultural land, the USDA isn't expecting any dramatic increases in the price of food this year or next.

But you can see small signs of the drought's effects if you look closely at the agency's latest forecast of food prices, which it released today. Meat prices are expected to go up more than fruits and vegetables, for instance, and that's on top of a hefty increase in meat prices last year.

The reason? Most of the crops that we eat aren't really suffering. The vegetables and the fruit generally come from irrigated fields, and there's plenty of wheat for our bread and pasta. The wheat harvest comes early enough that it beat the drought.

The crops that are really getting hammered are the ones we feed to animals.

Across the western plains, it's the grasslands, where cattle graze. In Illinois or Indiana, it's soybeans and above all, it's America's No. 1 agricultural crop: corn.

Here's another important fact when it comes to understanding where the economic impact of this drought will fall. About three-quarters of the farmers who grow corn and soybeans bought government-subsidized crop insurance this year. That will cover most of their losses. In fact, the farmers who picked the right kind of crop insurance will earn more money this year than they would have had there been no drought at all.

But there's no such insurance for the farmers who need that corn to feed their animals, such as David Hardin and his father, John, in Danville, Ind. They raise about 11,000 pigs each year. For the first time that David Hardin can remember, their own farm won't grow enough to feed those pigs.

"We've started to go out and buy corn on the open market, at the market price," he says. Last week, they paid $8.30 a bushel — twice what corn cost two years ago.

When corn is that expensive, Hardin is almost guaranteed to lose money. It costs more to feed the animals than he'll ever get paid for their meat. The same goes for chickens and cattle.

If a farm were a factory, you'd just shut it down for a while, and start up again when prices were better.

But you can't just flip a switch with animals. When I visited the Hardin farm on Monday, I saw three-week-old piglets, swarming over their mothers. "On Wednesday, we'll be weaning them from their mothers and taking them back to one of our nurseries," Hardin said.

These piglets will be money losers, "but the animals are on the ground, as we say," Hardin told me, and he'll just have to limit those losses by getting them up to market weight as quickly and efficiently as possible.

They have to keep the sows, too — at least most of them. If they want to have mother pigs popping out piglets 18 months from now when raising pigs may be profitable again, they have to keep feeding those sows now.

John Hardin says the goal is to ride out the storm. "There is no doubt that for the next several months we will be in a position of loss to be managed around," he says.

Much of that management involves cutting down the number of animals that farmers have to feed.

Hogs, dairy cows, beef cattle and chickens all are getting slaughtered in greater than normal numbers at the moment. Herds are shrinking. Some farmers are getting out of the business entirely.

That's actually increasing the amount of meat for sale right now. Down the road, though — certainly by next year — there will be less pork, beef and chicken for sale.

That will drive up prices for meat in the supermarket, "so in the end, consumers will pay," says Christopher Hurt, an agricultural economist at Purdue University. "But the problem for the livestock industry is, for the next year, or even year and a half, there can be some very large losses until they can get to better returns that will come in the second half of 2013 or 2014."

They'll really be able to cash in if there's normal rain next year and a better corn harvest.

Still, that's uncertain. And the uncertainty haunts Mark Legan, a farmer in Coatesville, Ind., with a herd of 3,000 sows to feed. He says that he does expect to ride out the tough times. But he's never seen anything like it since he started farming 22 years ago.

"It's really uncharted waters for me," he says quietly, sitting in his truck. "It really starts to play on your mind, too. My wife wants to know what's wrong with me at the end of the day, when I come in."

And it's more than just the financial situation, he says. Part of the stress just comes from watching the crops wither in the fields.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

ROBERT SIEGEL, HOST:

Even though a huge section of the country has been hit by drought, there is some good news. A lot of what we eat will not get more expensive. That includes most fruits and vegetables we would find in a grocery store. They are grown in irrigated fields, but as we just heard, we are likely to see the drought's impact in the meat, dairy and egg section.

More on that from NPR's Dan Charles.

DAN CHARLES, BYLINE: The crops that are getting hammered these days are the ones we feed to animals. Across the Western Plains, it's the grasslands, where cattle graze. In Illinois or Indiana, it's the soybeans and above all, it's the corn. David Hardin steps into a field of sad-looking corn plants on his farm near Danville, Indiana, and pulls off one ear. This one looks like baby corn, it's so tiny. There are no real kernels on this cob.

DAVID HARDIN: This looks like one of those ornamental ears that you might see on a fancy salad.

CHARLES: Still, for the most part, it's not the farmers who just grown corn and soybeans who are most worried right now. About three-quarters of them bought government-subsidized crop insurance and that will cover much of their loss this year. Some of those farmers, in fact, will earn more money this year than they would have had there been no drought.

But there's no such insurance for the farmers who need that corn to feed their animals. David Hardin and his father, John, for instance. They raise pigs, thousands of them. And for the first time that David Hardin can remember, their own farm won't grow enough to feed those pigs.

HARDIN: We've started to go out and have to buy corn on the open market at the market price.

CHARLES: Last week, they paid $8.30 a bushel, twice what corn cost two years ago. It may go still higher. When corn is that expensive, you're almost guaranteed to lose money feeding it to pigs. It costs more to feed the animals than you'll ever get paid for their meat. The same goes for chickens or cattle. If a farm was a factory, you'd just shut it down for a while, and start up again when prices were better.

But you can't just flip a switch with animals. In one barn on the Hardin's farm, there are three-week-old piglets swarming over their mothers.

HARDIN: Wednesday, this week, we'll be weaning them from their mothers and taking the piglets back to one of our nurseries.

CHARLES: Now, these are the piglets that are going to be consuming corn that's worth more than their meat is worth.

HARDIN: That's right, but the animals are on the ground, as we say.

CHARLES: And we just have to get them up to market weight as efficiently as we can, he says. And they have to keep the sows, too, at least some of them. If you want to have those mother pigs popping out piglets, say, 18 months from now when raising pigs might be profitable again, you have to keep feeding them now. John Hardin says the goal is just ride out the storm.

JOHN HARDIN: There is no doubt that for the next several months we're going to be in a position of loss to be managed around.

CHARLES: A lot of that management involves cutting down the number of animals that they have to feed. Hogs, dairy cows, beef cattle and chickens all are getting slaughtered in greater than normal numbers right now. Herds are shrinking. Some farmers are getting out of the business entirely. That's actually increasing the amount of meat for sale right now. Down the road, though, certainly by next year, there will be less pork, beef and chicken for sale.

That will drive up prices for meat in the supermarket.

CHRISTOPHER HURT: So in the end, consumers will pay.

CHARLES: Christopher Hurt is an agricultural economist at Purdue University.

HURT: But the problem for the livestock industry is, for the next year, even year and a half, there can be some very large losses till they can get to the better returns that we think will come in the second half of 2013 and on into 2014.

CHARLES: They'll really be able to cash in if there's normal rain and a better corn harvest next year so feed prices drop. Still, that's if there's rain. And the uncertainty haunts Mark Legan, a farmer in Coatesville, Indiana, with a herd of 3,000 sows. He says, I think we're going to survive this, but I've never seen anything like it.

MARK LEGAN: It's really uncharted waters for me, since I've been farming. And it, you know, really starts to play on your mind, too. My wife wants to know what's wrong with me at the end of the day when I come in.

CHARLES: And it's not just the financial situation, he says. It's hard just watching the crops wither in the fields. Dan Charles, NPR News. Transcript provided by NPR, Copyright NPR.

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