Samuel Case, FISM News
From massive flooding in parts of Asia, Europe, and Africa to the intense heat and record size fires in the United States, the Summer of 2021 will be remembered for wild weather. While it may be interesting for meteorologists, it’s made farming harder than it already is, as farmers face parched crops in an economic environment with increased demand and supply chain issues. To make matters worse, the sun scorched state of California is proposing water restrictions for farmers.
FISM News sat down with VP of Grain at Sunrise Cooperative, Craig Haaugard, to take a deeper look at the situation and for how long it’s going to affect food prices. The transcript of the interview can be read below. For more from Craig, tune into Financial Issues with Dan Celia weekdays at 10 AM E.T. for his daily Agriculture Update.
The following transcript has been edited for length.
How is the weather out west affecting farming and is it any worse than in previous years? I saw a comment from one farmer in Washington who said this is going to be the worst crop in 35 years. Is that true?
Yeah, I think that’s right. We’ve got a farm in South Dakota and I was talking to the guy who farms that land for us, he’s been working for 30 years and it’s the worst he’s seen. So actually if you look at South Dakota in the month of June we’ve got rainfall data for 127 years, it was the driest June in 127 years. I believe California is the same number if I’m not mistaken. So it’s extremely dry out there. The western corn belt is extremely dry. It’s already had the impact on the spring wheat crop and is definitely going to impact corn and soybeans out there as well. That’s just the way the weather is.
In California the state is considering not allowing farmers to syphon off river water in response to the drought. What is your opinion about that?
My understanding is that the farms have water rights that come with the farm. It seems like those are being negated. I was out there three years ago and with some fellows that farm. A lot of nuts – almonds, pistachios, and that thing. I found what’s interesting is the state, as it’s growing, has not improved infrastructure to capture the snow melt and so they haven’t kept pace with their population growth and really haven’t done so because of environmental concerns about building the dams to capture the water.
So we’ve created this scenario where even in a good year it seems like water is getting tight there. And then you get a year like this where you got a drought and you haven’t taken the steps to capture as much water as you could have anyway and it really compounds itself and makes a huge issue. It’s too late to do anything about it this year. Frankly it’s stuff that should have been dealt with a decade or two ago.
Are prices going up at the grocery store because of the droughts or is it because of COVID supply chain issues? Or is it a combination of both?
It’s a combination. Certainly the drought has had an impact, but we saw the grain prices start to run before the drought because of export demand. It was a demand driven market before it became a tight supply market. China had stepped up and bought a tremendous amount of grain. So I think export demand is part of it and now you exacerbate it with supply chain issues and a smaller crop than what the USDA initially thought we were going to have.
We’ll probably see high prices continue. One of the concerns going forward is going to be fertilizer. It’s really tight and we import a large portion of it from other countries, including China and in this past spring there were some co-ops where it was really short. If we lose our ability to provide fertilizer for the crop you’re going to see yields drop off. There’s a lot of things lurking out there that can be kinda scary and interesting at the same time.
So are the high prices here to stay?
I don’t think high prices for farmers are necessarily here to stay, but at the grocery story you tend not to see the corn flakes go down in price. They only go up in price. In meat you’ll see some adjustment, but in anything that has more processing to it I don’t think you’ll see those back off. It may be a while before we see meat back off, but that’s one that’s more likely to drop in the longer term, because there’s less processing and you’ve got a scenario where you’ve got X number of animals we can kill in a given day and when prices are good we tend to ramp up production.