Most Crop Damage from Drought Irreversible

September 21, 1999

USDA's Economic Research Service says critical stages of crop development generally occur in mid to late July, so heavy rains from Hurricane Floyd made little difference. The agricultural damage is "irreversible," ERS says.

The impact of the drought on agricultural production has been "limited," ERS says. The drought will reduce commodity receipts relative to 1998 an expected $1.29 billion. Projected farm net income losses, including yield losses, increases in expenses and insurance indemnities, will total $1.35 billion, about 3% of expected 1999 net farm income.

Drought impacts are more discernible in areas of the Northeast designated as extreme and severe drought. Net income there is expected to decline nearly $840 million from 1998. More than 40% of the total financial impacts relative to 1998 came from the "standard drought region" with $535.3 million in fewer receipts and $508.5 million in less net farm income despite less severe drought effects.

The report also notes that cash flow problems are being compounded by the drought; unusually low commodity prices may make it difficult for farmers to repay debt obligations. "This is a particular concern for commercial farm businesses which do not have off-farm income sources to remedy cash shortfalls," ERS says.

"Debt repayment will be especially reduced in the severe drought areas where the share of farms that do not generate enough income to repay debt is expected to increase from 8% in 1998 to 17% in 1999. The share of farms in the standard drought areas with debt repayment difficult is expected to remain similar to 1998 at 14%," the report continues.

The report is available from the Internet at http://www.econ.ag.gov/whatsnew/issues/drought/index.htm#page_top.