Drought’s impact on state’s economy could be ‘billions,’ agriculture economist says


LITTLE ROCK — While officials won’t know for weeks the full extent of the summer drought on Arkansas’ economy, one economist expects the cost will be staggering.

“It will work into billions (of dollars) before it’s over with,” Bobby Coats, an extension economist and professor with the University of Arkansas’ Division of Agriculture Agricultural Economics and Agribusiness, said last week.

“This is an historic drought event. The impact is being felt all over,” he said.

As the record-setting drought continues in Arkansas and across much of the United States, a group of agriculture economists with the University of Arkansas began last week to try and quantify the overall economic impact of the drought on the state’s agriculture economy. Their report is expected to be completed by early September.

Last week, agriculture officials said the state’s cattle and poultry industries have probably suffered the most, so far, from the drought, though pork producers and row crop farmers are also feeling the financial heat.

A report by the U.S. Department of Agriculture last week said the nation’s worst drought in 56 years will severely limit this year’s corn production. It projected corn yields would be lowest since 1995 and said food prices, both for people and livestock, are expected to rise to possibly record highs.

“If this keeps going on month after month, it spills into next year and then … it’s going to reduce our competitiveness into the export market, the consumer will see (soaring prices) in the food sector,” Coats said.

Food prices have been rising for some time, and “they’re being magnified now due to this drought,” he said.

Coats and Butch Calhoun, secretary of the state’s Department of Agriculture, both said last week that the nation’s worst drought in more than a half-century has been particularly hard on the state’s cattle farmers.

Many of the cattle owners are being forced to use up their winter hay supplies and are buying corn feed at prices more than triple the cost of three months ago because the drought has decimated the corn growers in Illinois, Iowa and other states, they said..

“All along the Arkansas River and northern Arkansas they have been hit tremendously hard. Some of them are selling off their cattle, some of them are getting rid of their breeding stock,” Calhoun said.

“It’s just has been devastating for them because their hay has burned up and their pasture is all burned up,” he said. “They are even having water shortages that they are having to deal with.”

Livestock auction barns have been busy over the past few months, he said, adding that the number of cattle being sold at auction is at least 30,000 more than this time last year.

“There has been a steady increase through this summer,” said Steve Bryles, director of the state Livestock and Poultry Commission.

He also said the poultry industry is struggling because of the drought.

Creighton University, in its Mid-America monthly Business Conditions Index published early this month, said the poultry industry in the state would continue to struggle if the drought is prolonged.

Ernie Goss, director of Creighton’s economic forecasting group, said the institution’s monthly look at economic indicators in the nine-state region, which includes Arkansas, found that the drought “will push growth in (Arkansas) lower in the months ahead, especially for firms with close ties to the state’s poultry industry.”

“Except for Nebraska, no other state in the region depends more heavily on food processing to support growth than Arkansas,” Goss said. “As a result, higher farm commodity prices in the months ahead will be a significant economic headwind for the state, but growth should remain positive, though weaker.”

Along with Arkansas, the monthly index looks at economic indicators in Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

Last week, the Obama administration announced that more than $3.7 million in federal funds are available to help Arkansas farmers and ranchers cope with the drought. The money is available through programs managed by the Natural Resources Services.

While the rising cost of corn and soybeans is good news for row crop farmers, they are struggling themselves because of the high cost of irrigating their crops, Calhoun said.

“When you get over into the Delta, what we’re looking at is the expense and cost that farmers are having to put into their crops, irrigation wells never being shut off, we’ve got some reservoirs that are being depleted, especially on the Grand Prairie, where there is just not that much underground water,” he said.

He said he has heard some soybean farmers say that they might not have enough water to last through the fall soybean harvest.

“We’re looking at records like 6 inches below normal statewide for an average on rainfall, so there is just not that much water,” he said. “They’re going to get a good price for their crops, but they’ve got some tremendous expenses in pumping water and fuel and diesel costs and electricity costs.”

Brad Watkins, research assistant professor of agricultural economics at UA’s Rice Research and Extension Center in Stuttgart, said he and three other agriculture experts are working on the economic impact of the drought and should have a report ready by late this month or early in September.

The study began last week. “We haven’t come up with anything yet,” he said.

Steve Halbrook, chairman of UA’s Department of Agricultural Economics and Agribusiness, said he and others in the department asked for the study to better understand the impact of the drought.

“This is something that really came up internally within the division of agriculture in the university,” he said. “This is a routine part of our mission within the state.”