For Release: July 29, 2002
SDSU Extension Economist:
Drought Damage Exceeds $800 million
BROOKINGS, S.D. -- Drought damage in South Dakota exceeds $800 million so
far, a South Dakota State University Extension economist said.
Matt Diersen, a risk and business management specialist for the South Dakota Cooperative
Extension Service, said that calculation is based mainly on the lost value of
pasture, culled livestock sold for less than their value due to drought, crop
losses and hay losses.
Fred Cholick, dean of SDSU's College of Agriculture and Biological Sciences, adds
that the SDSU calculation doesn't reflect indirect impacts.
"This is gross revenue at the farm gate," Cholick said. "This doesn't
reflect lost spending by ag-related businesses such as custom combiners. Nor does
it reflect the reduced spending power of our producers at their local community
businesses."
Here's a look at the numbers:
Pasture losses: Using a going rate of $18.30 per cow-calf pair per month,
Diersen calculates that South Dakota already has lost $138 million in value
from its pastures, mostly in the western and central parts of the state. The
federal Noninsured Crop Disaster Assistance Program will offset some of that loss,
but how much the program will help is unclear at this point. This value will be
reflected in lower per-head prices received for early-weaned calves and cull animals.
Additional feed expenses to replace lost pastures has already amounted to $100
million.
Lower value on early-culled beef cows: The drought is forcing producers
to cull about 30 percent of their beef cows this year compared to about 15 percent
in a normal year, Diersen said. Those animals that are being culled early still
have value as breeding stock, Diersen said, but producers are receiving slaughter
animal prices instead because so many are moving through local markets. At
a loss of $150 per animal, the statewide effect is $42.8 million.
Crops: Calculating that about 40 percent of row crop and small grain production
has been severely affected by drought, Diersen figures crop losses before crop
insurance payments could reach about $760 million, or one-fourth of a normal year's
value of $1.9 billion.
If crop insurance pays 65 percent of losses -- allowing that some crops such as
corn and soybeans are typically insured at higher levels than small grains --
Diersen calculates the losses to producers amount to $266 million to date.
Hay: South Dakota expects to harvest about 4.5 million acres of hay this
year, but yields will be about half of normal, Diersen said, or about .9 tons
per acre compared to 1.8 tons per acre in a normal season. Only about 20 percent
of the hay in the state is covered by insurance, Diersen said, and the level of
coverage is typically not high. Most of the hay raised in the state goes for livestock
use, not for sale. Diersen calculates the damage to producers at $75 million.
Other losses: Diersen said producers are absorbing an estimated $50 million
in other costs from the drought. Those include pasture lost for yearlings,
reduced dairy production, and a wide range of drought-related expenses. Water
hauling, additional transportation of cattle, building fences to graze Conservation
Reserve Program lands are such costs. Government support will also be lower,
because loan deficiency payments will likely be reduced by $150 million.
Diersen said the SDSU drought analysis will doubtless change as the summer progresses.
The current cost estimate totals over 20 percent of South Dakota farm receipts
from crops and livestock in recent years.
Cholick adds that the impact of the drought last week was an estimated $4 million
to $5 million per day, and that figure is growing exponentially as time passes
with no rain. "At some point in time the crop will not be able to recover
and it becomes a crop failure, which has already happened with 60 percent of the
South Dakota winter wheat crop," Cholick said.
Cholick said the numbers underscore the role SDSU and the South Dakota Cooperative
Extension Service have in funneling science-based educational information to producers.
"We can't change the numbers, we can't change the weather," Cholick
said. "Our role is to empower the producers as best we can to manage what
Mother Nature has dealt them."
More information about responding to drought can be found at a South Dakota State
University Extension Web site, http://sdces.sdstate.edu/drought/.
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Contact: Matt Diersen, (605) 688-4864
Editor: Lance Nixon, (605) 688-4653