Years of drought, heavy debt and rising energy costs are leading many Colorado farmers and ranchers to a financial and emotional breaking point, according to a Colorado State University economist.
The resulting fallout could likely have a more devastating impact on the state economy than those outside the industry realize, said CSU farm and ranch management economist Norm Dalsted. The double whammy of a six-year drought throughout the Western states and reduced government financial support has led to the crisis situation.
“I saw corn in Nebraska and South Dakota that was knee-high and dead as a doornail,” Dalsted said. “There’s not a lot of optimism around. It’s bad all the way to the Canadian border. It’s a disaster.”
In 2002, agriculture contributed between $15 billion and $16 billion to Colorado’s economy, according to Tim Larson, a Colorado Department of Agriculture marketing specialist. That figure includes farm production, inputs, processing and marketing.
According to 2002 mid-census figures – the most recent available – Weld County is the leading agricultural producer in the state, contributing $1.2 million, primarily in cattle/calves, hay and barley. Larimer stands at eighth, contributing $101,000 in products, primarily hay and cattle to the state’s economy.
Dalsted estimated more farmers and ranchers will file for bankruptcy this year than in recent years. “We’re going to have some banks closing because of the amount of debt they’re carrying for the producers,” Dalsted said. “Too many people are unaware of the situation out there in agriculture and it may be too late before they wake up.”
Dalsted said government assistance for smaller producers has increasingly turned from direct support to low-interest loans. Producers with drought-reduced harvests are faced by growing debt loads, often carried by local and regional banks.
“The limiting factor, contrary to what people believe, is water – in the form of Mother Nature, irrigation or runoff – not energy,” Dalsted said. “We can come up with alternate sources of energy, but it’s pretty difficult to come up with alternate sources of water. I don’t know of any other substitutes.”
Experts are predicting a poor fall harvest of several local crops, yet another result of the drought that began in 2000. Producer profits were further reduced by high energy costs and a diesel fuel shortage that began in early July. Early frosts and water restrictions for irrigation also cut into profits for some producers.
Winter wheat, a primary crop for Weld and Larimer counties, has harvested six below-average crops in the past seven years. The USDA forecast of 42 million bushels for this year is the second smallest crop since 1969. At an average yield of 21 bushels per acre, the fall harvest also is the lowest yield since 1968.
Prices rise as yields fall
Darrell Hanavan, executive director of the Colorado Wheat Administrative Committee, said the only upside to the low yield, reflected throughout the country, is the corresponding increase in market price for those able to produce a crop.
Winter wheat closed at $4.08 to $4.30 per bushel for Aug. 22. That compares to a 2005 average of $3.35.
Dalsted said the price is an improvement, but the profit margin is very slim in the face of rising costs.
He posed the example of a producer with a 15-bushel-an-acre yield earning $4 a bushel for an income of $60 per acre. A normal crop with a 35- to 45-bushel-an-acre yield at the same price would earn $185 an acre.
The extreme weather conditions have hit cow/calf producers as well, forcing livestock off forage and onto hay. The corresponding demand for alfalfa hay has USDA forecasting an upsurge in market price, while weather conditions will decrease output. The federal forecast anticipates a drop from 800,000 acres in 2005 to 770,000 acres in 2006.
Producers with good quality alfalfa hay are pulling in high market prices of $4.25 to $7 per delivered bale, as of Aug. 22.
Corn grain harvest doesn’t begin until late October, but Dalsted said the majority of crops appear to be holding steady. “It’s looking OK, if they have adequate water coming up, but there are producers suffering from shortages. I talked to one farmer who said the evapotranspiration rate has been about half an inch a day and the most he can apply per day is a third of an inch with his sprinkler system, so it’s going backwards.”
Even the spring sugar beet harvest was negatively affected by the summer’s triple-digit heat. Though production was up from 2005, the sugar beets ultimately rotted in storage.
Production increased, however, when Northern Colorado producers of all stripes planted sugar beets after Hurricane Katrina devastated Louisiana’s sugar-cane crops.
“Sugar from cane or beets is the same sugar, so it gave many here an opportunity to plant more this year,´ said Mike Hofer, vice president for agriculture for the Denver-based Western Sugar Cooperative. “Time will tell whether our (mid-October) harvest turns out better.”
While states in the hurricane alley may long for a touch of drought, Dalsted said Colorado is not alone in its longing for more water.
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