the republic logo

Price check: Drought impact felt on farms, in grocery stores

Follow The Republic:

Photo Gallery:
Click to view 4 Photos
Click to view (4 Photos)

The drought in Indiana has dragged down crop production, made it more expensive for livestock farmers to feed their herds and consumers already have to pay more for groceries.

Corn yields in Bartholomew County are expected near 85 bushels per acre, and about 100 bushels on average in Indiana — down significantly from the 165 bushels farmers were expecting at the beginning of the year.

Some farmers are seeing some acres with yields below 10 bushels.

“It’s going to be a big spread,” said Bartholomew County farmer Jim Daily, who planted about 2,000 acres of corn and soybeans this year and another 100 of produce he sells at Daily’s Farm Market, 2225 Jonathan Moore Pike.

Daily said some of his non-irrigated corn crops are producing less than 20 bushels per acre — but irrigated crops could reach 200 bushels.

Chris Hurt, an agricultural economist at Purdue University, said how farmers fare this year also will depend on their level of crop insurance and when they sell the crops.

Some farmers will struggle, Hurt said, but others might generate more revenues than they expected.

The farmer who is renting Hurt’s family farm is struggling, he said. Early this year, he agreed to sell an expected yield of 60 bushels per acre at $5 for a gain of $300 per acre. His actual yield is about 30 bushels, which will generate $150 per acre.

However, Hurt said, the farmer also has to purchase the difference, 30 bushels, from the local elevator at current prices, $8, to deliver to his customer the full 60 bushels. That means he will lose $90 on those 30 bushels ($150 he received upon the sale minus $240 he has to pay to buy them at the elevator), for total per-acre revenues of $60 — down from $300 he was expecting.

However, farmers who have crop insurance, and can sell their crops at current prices, might generate greater revenues than they expected.

About 70 percent of corn and soybean acreage in Indiana is protected by crop insurance, Hurt said. The most common form of crop insurance, revenue protection, allows farmers to insure a certain percentage of their yield.

For example, a farmer may expect to produce 160 bushels of corn per acre, and elects to protect 75 percent, or 120 bushels.

If his fields produce 100 bushels, he can sell those at current prices ($8) and get $800 per acre.

Insurance will give him another 20 acres at $8, for total per-acre revenues of $960, which exceeds what he expected to make from 160 bushels at $5 by $160.

“It’s possible to do better,” Hurt said.

The corn sector as a whole probably will generate more revenues than expected early in the year, he said, but individual farm families will experience significantly varied financial situations — even two families living a quarter mile apart.

The drought — and resulting lack of hay and high feed prices — also are prompting farmers to consider thinning their herds.

Hurt said farmers are going to sell some of their least productive animals to avoid having to pay high feed prices, and that will produce a short-term glut on the market and lower pork and beef prices this fall.

Daily, however, said that after he harvested sweet corn, he planted sorghum grass and expects to have enough hay to feed his cattle herd of 40 and have some left over to sell.

Daily said he plans to add some cattle, because demand at his local market keeps rising.

“We should be in pretty good shape.”

Hurt said this year’s drought and high crop prices likely will cause a greater-than-normal number of farmers, especially older ones, to hang up their boots for good.

“Losses just tend to encourage some to say, ‘It’s time,’” he said.

Farmers who can continue through next year, Hurt said, should be able to take advantage of some higher livestock prices next year — and higher meat prices for consumers.

Grocery shoppers already have to pay more for cereals, sweeteners and bread products, Hurt said.

And as farmers are selling some of their animals this year, the market will have fewer animals than normal next year, which will reduce the supply of meat, eggs and milk.

The U.S. Department of Agriculture predicts that consumers next year will see food prices rise about 4 percent, or about double the overall rate of inflation, Hurt said.

The higher food prices will cause hardships, especially for people with moderate and low incomes who already are struggling, he said.

Think your friends should see this? Share it with them!

All content copyright ©2016 The Republic, a publication of AIM Media Indiana unless otherwise noted.
All rights reserved. Privacy policy.