Midwest Counts Cost of Flood
An uninsured grower copes with Midwest deluge and considers the possibility of bankruptcy
FORTY days and nights of flooding in the upper Midwest has covered 16,000 square miles of farmland - more than a million acres of corn and soybeans, as well as wheat, oats, vegetables, melons, and hay.
"It's sunshiny today, finally," says Jeff Morgan, communications director of the Iowa Soybean Association. "But we're supposed to get rain again Wednesday through Friday."
The likely cost of the deluge depends on whether your feet are stuck in Midwestern mud, propped up on a desk in Washington, straining on tiptoe in the Chicago commodity-trading pits, or strolling grocery-store aisles anywhere in America.
In the southeastern Iowa town of Oakville, Richard Siegle farms 1,900 acres that lie between the levee holding back the Iowa River and the one holding back the Mississippi. The only items still in the Siegle home are the telephone, bed, and refrigerator. Everything else has been moved to higher ground.
If the levees broke, 1,200 of his acres of corn and soybeans would be submerged to a depth of 12 feet. He doesn't expect that will happen now. But he already sold uninsured grain he kept in storage to an inland grain elevator. He received 30 cents less per bushel than he would have from a riverfront grain terminal, if any had been open. "They gouged us," he mutters.
Meanwhile, Mr. Siegle worries about the water that seeps through the sand levees. He keeps eight pumps going to keep his land drained. Normally, only three are in service. "The cost is just going to be phenomenal," he says. Seepage prevented him from planting 120 of his acres.
Like 60 percent of farmers in the United States, Siegle does not have crop insurance, which he believes is overpriced. The insurance covers only losses beyond 35 percent, which another farmer likens to "fire insurance that only pays you if more than a third of your house burns down." And of the farmers who have insurance, almost none have the rider that would cover being prevented from planting by the wet weather. This planting stoppage rivals flooding as a cause of lost production, especially for soybea ns.
President Clinton wants Congress to send $1 billion in disaster-relief money to farmers whose crops were lost for causes occurring before Aug. 1. As proposed, the farmers would receive 32.5 percent of their crop's government target price, which is less than the market price. Farmers who also have crop insurance will get about four-fifths in total of the income they would have realized.
Siegle says he could be facing bankruptcy. "The margins are so narrow in farming. It's that bad." As for Clinton's proposed aid - "I don't think it's enough."
In Washington, US Department of Agriculture (USDA) grains analyst Jim Cole warns against writing off the nation's corn crop. "We're far from being in trouble," he says. Ohio and Indiana should have spectacular harvests, and the US has plenty of grain in storage. Ditto for soybeans, says Scott Sanford, another USDA analyst.
But will the wet weather delay the crops enough that a hot August interferes with pollination, or an early frost nips them?
Those questions concern Rich Feltus at Refco Inc., a commodity trading house in Chicago. Corn prices are up 10 percent since June; soybeans, 20 percent. "I'm the guy in charge of looking under every rock for what's going to turn this market around," Mr. Feltus says. So far he doesn't see the bull market ending.
Consumers can relax, according to Keith Collins, acting chief economist at the USDA. Corn and soybeans are primarily used as animal feed in the US. The cost of feed affects the food consumer price index by only two- to three-tenths of a percent, and food is only 16 percent of the overall CPI.