Calif. expected to lose 100 dairy farms to drought
I’m skeptical of this article by the San Fransisco Gate. It pegs the possible closures of 100+ farms fully on the drought of 2012 (and the journo throws in a few suicides for window dressing, which is frankly dishonorable imo). The piece concludes by showing that farmers want more government handouts.
Drought has impacted farmers. Feed prices are up, and farmers are indeed forced to sell their cattle at discounted prices. There’s no doubt about that.
But farm closures are just not that simple (nor as bleeding-heart, as SFG would have you believe). Bad management, broken or malfunctioning equipment, deferred maintenance, poorly negotiated contracts, over-reliance on government assistance, environmental requirements, failing to meet CAFO restrictions, milk pricing caps, bad loans, miss-timed market economics, poor year-on-year planning, and on and on and on. Dozens of issues kill a business. And it’s more likely that a mix of these issues would cause a dairy farm to go belly-up.
The article does not explore any of these issues. And they are incredibly complicated. It doesn’t even bother to show how farmers depend upon (and are rightly confused by) the insane interactions and contradictions between government hand-outs and strict regulations.
California farmers receive tens of millions of tax-payer funded insurance subsidies - every year. They also receive millions more from disaster relief programs (scroll to ‘livestock’ to see several programs) as well as price protection programs. These pots of cash are run by the USDA, again paid for by the American taxpayer. This is in addition to California subsidies and regulations.
There’s no doubt that droughts are terrible. But to bundle 100+ businesses in one sweeping article is not only misleading, it’s sloppy. Let me know think.
A staggering $25 billion in crop insurance claims to be filed by growers across the U.S. due to worst drought in decades
The nation’s drought and high corn prices are devastating California’s $8 billion dairy industry to the point where farmers can’t afford to feed their cows - and their professional trade organization has been regularly referring despondent dairymen to suicide hotlines.
Experts in the industry estimate that by year’s end California, the largest dairy state in the nation, will have lost more than 100 dairies to bankruptcies, foreclosures and sales. Milk cows are being slaughtered at the fastest rate in more than 25 years because farmers need to save on corn costs. According to the Western United Dairymen, a California trade group, three dairy farmers have committed suicide since 2009, despairing over losing their family’s dairies.
"I’ve never seen it as dire as it is now," said Frank Mendonsa, a Tulare dairyman who serves on the Western United Dairymen board. “Pride is just eating these guys up. People are calling me and asking me what to do. It becomes like a counseling session to stop people from hurting themselves. But it’s not just losing our jobs that is driving the desperation. We’re losing our houses, in some cases the same houses that our grandparents lived in, and we’re losing our entire identities.”
The problems started in 2009, when milk prices bottomed out and grain prices soared, partly due to the government’s ethanol mandate. Congress is requiring that gasoline producers blend 15 billion gallons of ethanol, made from corn, into the nation’s gas supply by 2015. Dairy farmers were forced to borrow against their land and cows to make their bills.
This finely written article explains how this year’s record drought affects insurance payouts to farmers for losses. Farmers insurance is subsidized by the Dept. of Agriculture. And the rates are capped, as well. Thus, farmers in the program only pay 40% of their insurance costs. Imagine the government paying 60% of your insurance premium for, say, your car. Socialism indeed.
Thousands of farmers are filing insurance claims this year after drought and triple-digit temperatures burned up crops across the nation’s Corn Belt, and some experts are predicting record insurance losses — exacerbated by changes that reduced some growers’ premiums.
G.A. “Art” Barnaby, a Kansas State University Extension specialist in risk management, estimates underwriting losses on taxpayer-subsidized crop insurance will hit nearly $15 billion this year. He expects a staggering $25 billion in crop insurance claims to be filed by growers across the nation, driven primarily by one of the worst droughts in the U.S. decades. His loss estimate is based on a loss ratio of $2.50 for every dollar paid in premium.
The U.S. Department of Agriculture’s Risk Management Agency made changes to the insurance program in the past year which are expected to increase the underwriting losses from the drought. The changes meant farmers in some states paid smaller premiums this year for corn and soybeans. Not only that, the agency adjusted yields for those crops upwards to reflect recent trends, Barnaby said.
"Anyone that is concerned about whether this will be sustainable over time will have to ask the question whether this was a good idea to cut rates," said Barnaby, who 20 years ago helped develop the insurance program. "Now, as a farmer, I like paying a lower rate. But my guess is the rates were not cut that much to be noticeable, but in aggregate they do make a difference."
The rate reductions were based on the assumption that new technology, such as genetically modified, drought-resistant seeds, would eliminate or reduce big losses, Barnaby said. “So it is ironic they got hit the first year out.”
Under taxpayer-subsidized crop insurance, farmers pay about 40 percent of the premium cost and the federal government picks up the rest. The government sets the rates and the underwriting rules, but the private companies get to pick the contracts they want to take a risk on. Coverage is based on both yield and price. An underwriting loss or gain represents the difference between premiums paid and amount of claims paid.
Read it: Roxana Hegemen of the Associated Press