Aug. 11, 2006

COLLEGE STATION – Estimated drought losses for Texas have reached $4.1 billion, eclipsing the $2.1 billion mark set in 1998, Texas Cooperative Extension economists reported Friday.

Crop losses are estimated at $2.5 billion and livestock $1.6 billion, according to the report. The current drought equals the multi-year dry period of the 1950s and could go down as the worst ever without substantial rainfall by the end of the year, according to Extension officials.

"The financial impact will be a major setback because of rising input costs, especially energy prices (to agricultural producers)," said Dr. Carl Anderson, professor emeritus and Extension economist. "Irrigation costs have soared and will cut cash flow from irrigated crop production substantially."

"Most of North Texas, East Texas and the Coastal Bend were in various stages of drought since May of last year, and hay supplies were depleted maintaining livestock over the summer and winter," said Dr. Travis Miller, Extension agronomist. "Much of the corn and soybean crop has been harvested for silage or hay; pastures are bare and hay barns are empty. Much of the hay being fed is from out-of-state or along the upper coast, which has received favorable rains. Livestock water supplies are disappearing and ranchers are unable to sustain herds with purchased hay and dry tanks."

Rural areas are being hardest hit, Anderson said, with projected economic losses at $8 billion when the agribusiness impact is included. This includes businesses that provide equipment and services to farmers and ranchers, including machinery sales, supplies and other production needs, Anderson said.

The driest regions of the state are the Panhandle, Southern High and Rolling Plains, Northeast Texas and the Lower Rio Grande Valley.

"If it rained now, it would be too late for the main crops," Anderson said.

Statewide, cotton, corn sorghum and soybeans have been rated 48 percent to 58 percent in poor to very poor condition for several months.

"That's very indicative of production levels around half a crop," Anderson said. "Much of the corn in Central Texas has been made into silage or hay and most of Northeast Texas soybean crop has been cut for hay to supply dairy operations in desperate need of forages. The irrigated peanut and rice crops are the only crops rated mostly in good to fair condition."

More than $1 billion of the current losses come from cotton, Texas' No. 1 cash crop, Anderson said.

"Because of dry soil, much of the cottonseed planted failed to germinate," he said. "The 2006 winter wheat crop fell to 35 million bushels, the lowest level since 1971 and two-thirds below 2005 production."

Only 1.4 million acres of wheat were harvested, the smallest acreage since 1925, Miller said.

Cattle producers are facing some of the toughest times ever, Anderson said, due to lack of hay and available forage on pastures.

"Three-fourths of the land in range and pasture is too dry to produce much grazing or hay that is harvestable," he said. "Without rain soon, livestock herds will face further liquidation."

At biggest risk are the state's cow herds, Anderson said. Rising hay and supplemental feed costs are forcing many ranchers to liquidate herds and lack of water has forced some to sell out completely.

"Cattle sales are up sharply from a year ago," Anderson said. "The reduction in herd size will curtail beef supplies for several years. Also, the lack of adequate nutrition for cows means a smaller calf crop next year."

However, land values continue to increase mainly due to purchases for recreational and hunting purposes, Anderson said. But the drought will "stress wildlife sources and reduce the amount and quality of wild animals and birds," he said.

"Wildlife management programs are critical to maintaining the recreational value of land used for outdoor recreation during drought years," Anderson said.

Agricultural lenders are reporting fewer loan repayments and greater demand for loan renewals and extensions from a year ago, according to the Second Quarter 2006 Survey of Agricultural Credit Conditions by the Federal Reserve Bank. Producers are collecting insurance based on individual coverage on dryland crops and many cow-calf operators have taken out larger loans because of higher feed costs.

"Others have sold their herds due to limited water and forage," Anderson said. "High energy prices have substantially increased production costs to further stress an already depressed production environment. Some crop and cow-calf operators can't financially withstand more losses and will be forced to seek other jobs or business alternatives."