Western cattle ranchers may be hit harder by the drought in the nation's heartland than farmers in the Corn Belt.
WASHINGTON -- Western cattle ranchers may be hit harder by the drought in the nation's heartland than farmers in the Corn Belt.
Most corn farmers have subsidized crop insurance, a program so generous that farmers who lose their entire crop could wind up making more money than if there were no drought at all.
Cattle ranchers across the country, however, are seeing the price of corn, hay and other feed skyrocket as a result of diminished yield, forcing many of them to slaughter their animals now rather than later. Corn has gone from about $5.50 to $8 a bushel, and hay and other grains are following.
The drought "has a tremendous ripple effect," said Jim Warren, owner of 101 Livestock Market, a cattle auction in Aromas, Calif. In the last three weeks, the price of young steers waiting to be corn-fattened has plunged from $1.40 to $1.10 a pound, Warren said, mirroring the rising cost of feeding them.
"The cattle market is really dropping," said Kevin Maloney, owner of Fallon Hills Ranch in Tomales, Calif. "We're grass fed, so grain prices aren't affecting us, but we're already at historically high hay prices, and the drought is so bad that it's tightening the supply of hay."
Forty percent of U.S. counties have been declared disaster areas as the worst drought in a half-century blankets the Midwest. With ranchers and grain farmers sprinkled liberally throughout GOP-leaning regions, some of which, like Iowa and Colorado, are critical to the fall elections, the drought has wreaked havoc for House Speaker John Boehner, R-Ohio.
Boehner lacks the votes in his own party to pass a farm bill that would address the drought, even as Congress prepares to recess for the summer. Conservatives don't like the farm bill's nearly $1 trillion 10-year price tag, most of it for food stamps. Democrats don't like its cuts to food stamps.
Boehner might allow a vote this week on a disaster aid package for livestock only. That could become a vehicle for the five-year farm bill that the House Agriculture Committee and the full Senate have passed.
Even before the drought, cattle numbers were dwindling after years of droughts and herd liquidations, Warren said. "Nationally, we have 31 million cows and we should have 38.5 million," he said.
Corn farmers, while seeing their fields shrivel and die, have access to taxpayer-subsidized insurance that protects their revenue. On average, taxpayers subsidize about two-thirds of the premiums of all crop insurance. Cattle ranchers do not have insurance and never participated in traditional subsidies.
Midwest corn farmers widely insure their revenue per acre at the harvest price. As the drought drives up corn prices, it drives up the insurance payout.
"The amount of dollars per acre that the taxpayer is guaranteeing the producer goes up if crop prices go up, which is exactly what's happening in this drought," said Craig Cox, director of the Iowa office of the Environmental Working Group, which opposes commodity subsidies.
Farmers who insured their corn last spring for $5.68 a bushel may wind up collecting insurance at $8 a bushel, Cox said. That means farmers who lose their entire crops could earn more from insurance than if they had sold a full crop at normal prices.
But David Friedberg, chief executive of Climate Corp. in San Francisco, which uses weather modeling to sell unsubsidized crop insurance to cover deductibles and other losses not covered by federal programs, said he thinks that is unlikely.
"I don't see very many people actually making money from the drought, given how bad yields are," Friedberg said. "Most farmers are suffering."
Reach Carolyn Lochhead at clochhead(at)sfchronicle.com. For more stories visit scrippsnews.com