Farm Aid Shrinks as U.S. Debt Deal Means No Bailout

Sunburn is hard to avoid in the heat of a southeast Texas summer. Even the watermelons have it this year.

James Wiggins has turned six irrigation engines onto the fruit on 2,000 acres spread across his three farms in Texas almost every day since May. While he does his best to protect the skin of the melons and ensure their growth, he says about half will weigh 12 pounds instead of the usual 15 to 22 pounds. At least a quarter of the crop may fail.

“We’ve never had a year that we’ve had to water this much,” Wiggins, 64, said in an interview. “Even with water, the fruits have been mostly small. And with the heat, most of it is sunburned before it even gets ripe.”

Extreme weather that is reducing yields of corn, wheat, cotton and soybeans is also taking a toll on smaller crops, leaving pockets of losses in a farm economy the government says may produce a record $94.7 billion in profit this year, thanks to higher prices for the crops that do reach harvest and better weather in other parts of the country.

From growers of Texas watermelons and Oklahoma peppers to North Dakota barley, farmers in the central and southern U.S. endured drought or flooding, Bloomberg Government reported.

Extra U.S. taxpayer aid to farmers, along the lines of disaster bills that cost more than $30 billion in the late 1990s and early 2000s, isn’t likely now because of the federal deficit, Agriculture Secretary Tom Vilsack told reporters on a conference call Aug. 8.

The U.S. Department of Agriculture valued all crops at a record $192.5 billion last year including $135 million in chile peppers, like those Merlin Schantz grows on his 200-acre farm, in Hydro, Oklahoma. Photo: Schantz Farms Close

The U.S. Department of Agriculture valued all crops at a record $192.5 billion last... Read More

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The U.S. Department of Agriculture valued all crops at a record $192.5 billion last year including $135 million in chile peppers, like those Merlin Schantz grows on his 200-acre farm, in Hydro, Oklahoma. Photo: Schantz Farms

“We have worked very hard to do what we can within the existing authorities that we have,” Vilsack said.

Delaying Repayment

In response to the drought and other weather disasters, the U.S. Department of Agriculture has offered loans to cover costs, let growers delay repayment on previous obligations and allowed cattle to graze on acreage set aside for conservation.

Farmers aren’t expecting the federal government to bail them out, according to Mark Seastrand, a North Dakota barley farmer.

“Most of us realize that’s a thing of the past,” Seastrand, 46, said in an interview.

A 10-month drought centered in Texas that spread through Oklahoma, New Mexico, Arizona and Kansas has moved into Corn Belt states such as Iowa and Illinois, according to the Aug. 9 U.S. Drought Monitor. The dry weather has “left little hope” for crops that rely on rain for irrigation, according to an earlier report.

Chile Peppers

After July’s heat wave, the USDA on Aug. 11 reduced its estimate of the corn harvest by 4.1 percent. Corn, valued at $66.7 billion in 2010, is the biggest U.S. crop, followed by soybeans, hay and wheat. All crops were valued at a record $192.5 billion last year. Of the total, fruits and nuts accounted for $20.2 billion, and vegetables $12.6 billion.

That includes $135 million in chile peppers, like those Merlin Schantz grows on his 200-acre farm, 60 miles (97 kilometers) west of Oklahoma City.

This year, his plants, used in foods from hot sauce to sausage, have been withered by drought.

“Right now, we’re going to be at a total or near-total loss” on crops that aren’t irrigated, said Schantz, 52, whose family lives in the house where he grew up near Hydro, a town whose name has taken an ironic cast this summer. “If we have an early freeze, we’ll be devastated.”

Without better weather, Schantz said he may lose as much as $250,000 in revenue, a quarter of what his farm usually grosses annually.

California Citrus

Better weather is helping some farmers. In the Northeast, a sunny summer has improved fruit crops, and in California, the nation’s largest agricultural producer, cooler temperatures have boosted citrus harvests, according to the USDA.

Temperatures in states from Nebraska to Ohio still averaged 6 degrees to 9 degrees Fahrenheit above normal in the first week of August, according to the USDA. In July, parts of the Midwest, the main growing region for corn and soybeans, were the hottest since 1955.

Farm losses have already cost insurers such as Wells Fargo & Co. (WFC) and Ace Ltd. (ACE) almost $700 million, according to the USDA. More than $520 million of crop insurance payments have gone for drought and $88 million for flooding, with the rest for damage from diseases, tornadoes and other causes.

Floods slowed planting and swamped crops in the northern Great Plains and along the Missouri River.

‘Battling Mud’

“We’ve been battling mud in the fields,” Seastrand said. He planted 1,600 acres of barley, wheat and soybeans this year outside Sheyenne, North Dakota, down from the usual 2,200 acres. Seastrand’s barley is turned to malt for Budweiser beer made by Anheuser-Busch InBev NV. (ABI)

North Dakota, the top U.S. producer of barley last year, will fall behind Idaho and Montana this year with a 43 percent smaller crop, the USDA said Aug. 11.

Russ Harville, manager of barley malt procurement for Anheuser-Busch, a division of Leuven, Belgium-based Anheuser- Busch InBev NV, said in an e-mailed statement that the company’s “geographical diversification, strong inventories of choice barley, long-term barley contracts and grower relationships allow us the ability to manage through these conditions.”

Last year’s U.S. barley crop was valued at $691.1 million.

Watermelon-grower Wiggins said the high cost of fuel needed to move the scarce water available through irrigation systems to fields will make it a break-even year for farmers around Snook, a town in Burleson County, Texas, that claims the invention of chicken-fried bacon. U.S. farmers grew about $492 million in watermelons last year.

Irrigation costs have grown threefold, and the workforce can’t be cut because harvesting will have to be done quickly, according to Wiggins, who has a farm near Snook.

“If you cut down on the number of employees harvesting and packing, it’ll take too long and more melons go bad,” he said.

To contact the reporters on this story: Alan Bjerga in Washington at abjerga@bloomberg.net; Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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