Profiting from the U.S. Drought

Higher commodities prices and payments to farmers who purchased crop insurance have led the U.S. Department of Agriculture to conclude that total farm profits will rise this year to $122.2 billion, up 3.7% from last year. With half the country's croplands declared disaster areas - mostly due to drought - futures prices for corn, wheat, and soybeans are all higher, which is good news for farmers with yields close to their original projections.

For others, such as beef and dairy producers, who must pay higher prices for feed, federal crop insurance will help make up the losses. The same is true, of course, for grain producers whose crops were devastated by the drought.

The U.S. corn crop is currently estimated to total 10.78 billion bushels, about 17% below last year's total. Crop sales are expected to rise 6.7% this year to $222.1 billion for farmers, while livestock producers will see sales fall by 0.1% and farm-related income - including crop insurance payouts - will rise 32% to $34.5 billion and other federal subsidies will add $11.1 billion to the total.

There are critics of federal farm programs, according to Bloomberg, who say that the U.S. no longer has a "safety net" for farmers, but a "springboard toward profits." A bill to provide $383 million to help farmers who do not have crop insurance is stalled in Congress.

Paul Ausick

Filed under: 24/7 Wall St. Wire, Agriculture, Food