Policy Brief Vol. 5, No. 33:
August 22, 2002
Drought Response Becoming War of Words
The brickbats just keep flying. Within recent days, two of the nation's largest newspapers have again taken aim at the 2002 farm bill. It's probably a warm-up for congressional consideration of drought-disaster legislation in early September.
Make no mistake about it. Disaster legislation will be difficult to pass without a spending offset elsewhere in the federal budget. The likely source of such an offset? I'd be amazed if it's anything other than the Farm Security and Rural Investment Act of 2002.
Not surprisingly, Nebraska farmers and ranchers have a different perspective on the need for drought relief than do their East Coast critics in the media. It's not as simple as just buying crop insurance.
For one thing, insurance is not available for significant parts of Nebraska's agricultural sector. Take pastures and rangeland, for example. Nearly every one of Nebraska's 23 million acres of grazing land has been stunted by the drought.
In many cases, cattle have been pulled off pastures long before the traditional end of the grazing season. Some cows have been temporarily placed in feedlots where they will be fed hay or silage. Calves have been weaned early. And, of course, in some cases producers have been forced to sell cows and calves because the feed outlook is so bleak.
This year's hay crop - which is also uninsurable - also figures to be down significantly from recent years. Reduced supplies of hay will mean higher feed costs next winter.
One other adverse impact of drought from the perspective of the cow-calf sector is that feeder cattle prices have dropped in response to higher corn prices. For some ranchers, that may be the final straw.
Most crops eligible for insurance are, in fact, insured. Included are the big four of corn, soybeans, wheat and sorghum. Although final coverage figures won't be available until later this year, it's likely that 90 percent or more of the acres planted to these crops in 2002 have some level of coverage. However, even at a relatively high 80 percent yield guarantee, financial losses still will occur for many producers. Margins are that thin.
Finally, the severity of the drought in Nebraska pushes up the urgency of a public response several notches. In early August, almost all of the state was categorized by the National Weather Service as being in a severe, extreme or exceptional drought. The last category, which encompassed at least one-quarter of Nebraska, is reserved for once-in-50-years occurrences. When Nebraska's farm income is totaled for 2002, I expect it will confirm that we haven't been crying "wolf" about how bad things have been in the Cornhusker state.
08/22/02-RF/DM
Roy Frederick - Ph.D.
Agricultural Economics
Professor
(402) 472-6225
Dan Moser IANR News & Photography Coordinator (402) 472-3007
Department: Agricultural Economics
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