Thursday, March 28, 2013

Midwest drought: Worse than last year?

The drought in the Midwest area of the country last year caused higher prices for most agricultural products, including jumps in both corn and soybean prices.   Speaking generally, it was considered a very serious drought. 

Right now we're seeing worse conditions in the Midwest than we saw at this time last year.   The long term forecast says it's very likely that we'll get an even worse drought in the Midwest this year.  Farmers have insured a record percentage of their crops, and livestock prices are acting like the drought is already here;  the prices of weaner pigs in Iowa is dropping faster and farther than it did at this time last year. 

Here's a graphic showing the conditions at this time of year for the last three years

Here's a graphic showing the conditions at this time of year for 1933, 34 and 35

You may know the drought of 1933-35 by another name:  The dust bowl

Modern agricultural practices mean that dry conditions won't cause the mass destruction of farmland as happened in the dust bowl, so it's unlikely we'll see anything visually like that, but most of the information I'm seeing says we're headed for a very dry year this year in the Midwest.  My guess is that we will see higher prices of virtually every food item as a result. 

Droughts can last more than one year; they can, and have, lasted 7 to 10 years in living memory.   The northwest part of the country, where my farm is located, is also probably going to get less rain than we usually do.  It doesn't make much difference in western Washington -- last years "drought" was generally considered to be great for crops, and we've got adequate snow accumulations to provide water through the summer for drinking and so on.  In Eastern Washington a large percentage of farms are irrigated, and the rest grow "dry land" crops, like wheat, which are tolerant of pretty dry conditions.  So this area will probably do fine. 

If this drought is as bad or worse than last year, where I saw farmers haying the freeway medians, I think we will see a continued reduction in the size of the US food animal herds; sows and cows will both be culled because of continued record high feed costs.   Normally this sort of thinning of the herd would keep beef and pork prices down, but we're already starting out with fewer cows and sows than we have had since the 1950s.  You'll see prices lower than you would without the culling, but you won't see low beef or pork prices. 

So I'm buying cattle this year, and I'm probably going to buy heifers.  I'm checking the trailer and considering a trip to the Midwest to buy them.  I think there's going to be a buyers market there this year.   I'll buy some steers for sale sooner, but a few cows to produce calves is where I'm going. 

My basic bet is that 8 to 16 months from now the price of beef will be higher than it is now, and that 2 to 3 years from now there will be a steady market for calves to replace some of the animals being slaughtered now.  

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