Epic drought has wide-ranging ramifications

Beyond the obvious and immediate financial ramifications, the 
drought will have many other wide-ranging affects. | Getty Images

It takes forever for the combine hopper to fill, providing lots of time to ponder the impact of this widespread drought. It has become a harvest season for managing expectations.

Whenever you start to combine spring-seeded crops before the end of July, it’s never good news. However, until combines are actually in the field, it’s easy to be in a state of denial. Maybe, just maybe, crops aren’t quite as bad as they look.

Rather than a pleasant surprise, crops in most cases are as bad as they appear and in some instances even worse. Producing anything close to an average crop this year is a major success story.

Grain producers can be thankful for crop insurance programs that are providing the best coverage in history. Yield coverage has edged upwards and insured price levels, although they look low now, are higher than previous years.

Expect record crop insurance payouts, but the crush of crop claims could easily mean claim settlement delays.

Grain prices have shot up to record levels. A small crop might generate the same or more dollars per acre because prices are so buoyant. For those localized regions with good crops, this will be a great year financially. No doubt a few producers will harvest 50 bushel per acre canola crops and sell at $20 a bushel for a gross of $1,000 an acre.

On the other hand, for those with inadequate production to meet contract commitments, high grain prices are salt in an open wound. Buying out contracts will worsen their financial situation.

For those with production contracts that include an Act of God clause, contract buyouts will be avoided, but the price upside has been missed. Production contracts are often 10 bu. per acre and for many that will mean little or no non-contracted production to sell at a high price.

Beyond the obvious and immediate financial ramifications, the drought will have many other wide-ranging affects.

Herbicide residue will be a serious issue. Without moisture, many herbicides with residual properties will still be around to damage susceptible crops next year. Crop planning for 2022 will need to take this into account.

The explosion of grasshoppers could be setting up an even more serious problem for next year. Adult hoppers have had lots of hot, dry weather to lay eggs for hatching next spring.

With fertilizer prices stubbornly high and cash flow poor, producers will be looking to cut back on fertilizer use. Soil tests should be a useful tool for determining how much of this year’s fertilizer is available in the soil for next year’s crop. Expect less fall fertilizer application than usual.

Seed supply could be a problem for some crops. Disease shouldn’t be an issue, but what about germination on shrunken, shrivelled kernels? Seed multiplication of new varieties will have been curtailed.

The lack of grain volume will hurt many industries beyond the farmgate. Custom grain haulers will be starved for business. The bottom line for elevator companies will be slashed and it wouldn’t be surprising to see more pulse and specialty crop processors in financial difficulty due to the lack of grain volume as well as the price volatility.

Farm equipment sales that had been booming are likely to see a slowdown. Don’t expect land prices to drop, but perhaps the price appreciation will be curtailed somewhat.

The storylines from the epic drought of 2021 will unfold for months and years to come.

Kevin Hursh is an agricultural journalist, consultant and farmer. He can be reached by e-mail at kevin@hursh.ca.

For more content related to drought management visit The Dry Times, where you can find a collection of stories from our family of publications as well as links to external resources to support your decisions through these difficult times.

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