Monday, October 29, 2012
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Special feature from the  Farm Outlook Fall 2012  magazine

How will the ag industry fare with this drought?

By Derek Hurley

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[October 29, 2012]  It was certainly a very dry year for crop production in 2012. The lack of rain has affected everyone, with farmers experiencing the drought firsthand. According to John Peters of the local Farm Services Agency office, the drought will affect the agriculture industry in multiple ways.

The question that is likely on everyone's mind: Just how many crops will be lost this year because of the drought?

"Variability is likely to be very high this year," said Peters, referring to crop yields across the county.

From the early start of harvest, fields were yielding different amounts. Final averages were anticipated to be extremely low in Logan County. In late September, still weeks before all fields would be in, Peters speculated that the percentage of crops lost this year would probably be at least 30 percent, possibly even closer to 50 percent.

According to the National Agricultural Statistics Survey, or NASS, in the last five years Logan County has produced an average of 181 bushels per acre in corn.

Peters said that so far this year, he has heard a lot of farmers reporting harvests of only 50 to 75 bushels per acre of corn. "Occasionally we've heard of someone getting 130 bushels, but that's still low," said Peters.

But the drought is not only drying the crops out. Such a dry heat provides a perfect environment for aflatoxin to grow and spread.

Aflatoxin is a fungus that grows on crops. Host crops are particularly susceptible to the infection of aflatoxin under dry, hot conditions. In other words, the drought of 2012 provided the perfect climate for aflatoxin levels to rise.

"A lot of the farmers are hauling their corn straight to the elevators because of the aflatoxin," said Peters.

Normally, corn may be stored in bins before it is taken to an elevator. However, since aflatoxin will naturally spread in a bin, storage has not been a feasible option.

The FDA limit on aflatoxin is 20 parts per billion for corn that can still enter the market. Depending on the toxin levels found, some loads rejected at the elevator can still be used for animal feed so long as they do not exceed certain levels:

  • Corn for lactating dairy animals may not exceed 20 ppb.

  • Corn for breeding beef, dairy cattle, breeding swine or mature poultry cannot exceed 100 ppb.

  • Corn for finishing swine of 100 pounds or greater cannot exceed 200 ppb.

  • Finally, corn for finishing beef cattle cannot exceed 300 ppb.

According to survey results from the Illinois Department of Agriculture, as of Sept. 13, 32 out of 136 samples, or 23.5 percent, of Illinois corn tested had aflatoxin levels above 20 ppb.

In 2011, only six out of 397 corn samples contained more than 20 ppb of aflatoxin.

As for Logan County this year, nine of the samples reported have contained between 50 and 100 ppb of aflatoxin.

Peters said the situation concerning aflatoxin this year has been reminiscent of the problem with diplodia in 2009. However, that year's growing season had the opposite problem: a very wet season as opposed to a dry, hot season.

Long-lasting and extreme daytime temperatures, the lack of cool night temperatures, poor soil moisture, no rains when needed for pollination processes, as well as the growing presence of aflatoxin -- all took their toll on yields this year.

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In turn, the reduced crop yields affect livestock farms as well. Lower crop yields result in higher grain costs, therefore higher costs for feeding livestock. Also, the presence of aflatoxins in feed can result in sow abortions and death in young piglets.

Another side of agriculture that has been affected by the drought is the business aspect of farming. As a result of the drought, farmers will be looking to cover their financial losses.

Unfortunately, the farm bill expired in September. There is currently no legislation to ensure price protection for the farmers. There is a new bill sitting in the House of Representatives, but progress has stalled.

As for what farmers can do to protect their investments, Peters advised: "Document everything, just in case something should happen that would include this season." Peters also said that farmers should make sure they keep their insurance agents up to date on every possible claim they may have to file.

According to statistics from the University of Illinois, 78 percent of farmers in Illinois have some form of crop insurance. Of the acres planted, 59 percent are insured with revenue protection and 7 percent are insured with a group risk income plan.

Insurance payments made to farmers will depend largely on crop prices. As of Oct. 12, projections placed corn at $7.50 per bushel and around $15.50 per bushel for soybeans. However, both prices will likely be higher than these projections. As a result, insured farmers will likely receive large insurance payments.

As an example, an actual yield of 120 bushels per acre would result in an insurance payment of $210 per acre for a $7.50 harvest price.

While Peters was unsure of specific figures, he also commented: "I'm not positive if insurance premiums will increase much, because they derived from a multiple-year loss ratio data, so when you figure in one bad year, the overall effect won't be seen directly; but don't be surprised to see some changes, plus we will have to see what corn and soybean prices are in February before we really know."

On a final note, Peters commented on the state of the Conservation Reserve Program. CRP is designed to protect areas of land from erosion, to aid in the filtering of streams, as well as to create habitats for wildlife. The Commodity Credit Corp., under the FSA, provides rent to farmers who lease parcels of their land that they are not using for crops or livestock.

Peters said he does not think that a lot of farmers will pull out of CRP, as the land in question is usually unusable, or at the very least, less productive. Typically, in Logan County, land in CRP is near too much water to be of use for crops.

"Everything is just up in the air right now," said Peters, referring to the drought's effect on every aspect of agriculture.


Note: John Peters is the executive director of the Logan County FSA office, under the USDA. The USDA is responsible for the Risk Management Agency. The RMA provides guidelines and rules to the various insurance agencies that offer crop and livestock insurance to farmers nationwide.

Be sure to check out all the articles
in the Farm Outlook Fall 2012 magazine:

  • 2012 in review

  • Yields: Complicated by aflatoxin

  • Hybrids saved us

  • Insurance claims in drought

  • Impact of drought on ag loans

  • Droughts: 1988 vs. 2012

  • Roundup: A view from all sides

  • How were the farmers markets affected?

  • Introduction: Troy Rawlings

    • Troy Rawlings: Benefits of GMOs

  • An optimistic outlook

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