September 1, 2005

Drought Costing Northeast Missouri Farmers the Most

With crop loss estimated higher than 50 percent, an MU FAPRI study of representative crop farms shows the biggest cash margins losses in northeast Missouri.

COLUMBIA, MO -Farmers in areas of the state hardest hit by the drought of 2005 may face bigger cash losses than they might expect by looking at projected yield declines, University of Missouri economists said.

Corn yields are projected to drop 53 percent in the Northeast Missouri Crop Reporting District, the hardest hit in Missouri. Soybean yields are projected down by 35 percent.

“We estimate that this yield hit will reduce the operator’s cash margin by about $42 per acre,” said Brent Carpenter, farm analyst with the MU Food and Agricultural Policy Research Institute (FAPRI). “Cash margins went from profits to losses.”

Economists compared returns from reduced yields with returns at trend yields for the crop year, given information available in mid-August. The study looked at nine feedgrain-soybean farms for which FAPRI has extensive farm records.

The cash margin in northeast Missouri dropped from a projected $35 per acre with trend yields, to a loss of $7 per acre with current crop conditions and crop price outlooks. Estimated receipts include governmental support and crop insurance indemnities. Cash margin is what the household has left after farm expenses, Carpenter said.

“For a northeast Missouri farmer with 2,000 acres of crops, that means a cash loss of $14,000,” said Abner Womack, FAPRI co-director. “It may take a farmer two or three years to get out of that hole. We’ve seen that happen to crop farmers in northwest Missouri hit by droughts in previous years.

“This drought was most unusual, in that it wiped out crops in a relatively small part of the Corn Belt,” he said. “There won’t be enough drought impact on national yields to force corn prices up.”

FAPRI projects average corn price at $2.04 per bushel for the year.

“If there is a bright spot, it is that apparently soybeans were not hurt as much as corn,” Womack said. “There will be good soybean prices, at $6 per bushel. But, that is primarily due to two years of drought in Brazil, and not the current Midwest drought.

“It is most unusual to have $2 corn and $6 beans at the same time,” he added.

Other Missouri crop districts studied had less drought damage than the northeast, resulting in smaller but positive cash margins.

The drop in cash margin would be only $3 per acre in the Northwest Missouri District, which had more rain. Cash margins dropped $23 per acre in the North Central District, $14 in the West Central District and $12 in the Southwest District.

The Northeast region was in the drought the longest, with low rainfall and hot temperatures during the time that corn was setting ears.

The representative farms in northeast Missouri are in the claypan region, with shallow top soils and an impermeable layer of clay that prevents crop roots from growing deep into subsoil moisture.

The crop yield losses are based on the August 1 crop report from the Missouri Agricultural Statistics Service, compared to a five-year average.

FAPRI economists monitor 40 representative farms across the state, with the major crop and livestock enterprises of the state. A FAPRI representative farm is a model farm constructed with the assistance of a panel of farmers who operate similar types of farms in a county. They determine what are representative enterprises, costs, yields and returns for their types of operations. Representative farm models are used to test the impact of federal farm policy changes and government payment programs.

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