Borg: Bread basket jeopardy. Iowa farm crops are taking a weather beating and the world may feel the consequences. We're exploring the damage scope and recovery options with Iowa's Secretary of Agriculture Bill Northey on this edition of Iowa Press.
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On statewide Iowa Public Television this is the Friday, June 20th edition of Iowa Press. Here is Dean Borg.
Borg: As flood waters recede Iowa farmers, commodity traders, conservationists, economists and consumers are assessing the damage and calculating next moves. We're all seeing urban damage, highways, bridges, levees and stressed sewage and water systems. But rural Iowa's pain is dispersed and more difficult to quantify. Suffice to say in many areas those expecting corn knee high by July 4th are dreaming right now. Iowa's Secretary of Agriculture Bill Northey is a northwest Iowa grain farmer and we're seeking his assessment today. Welcome back to Iowa Press, Secretary Northey.
Northey: Good to be back, Dean.
Borg: Across the table Iowa Press regulars, Des Moines Register Political Columnist David Yepsen and Associated Press Senior Political Writer Mike Glover.
Glover: Secretary Northey, let's step back a second and get your assessment. We've all seen these horrible pictures of flooded Iowa farmland. How bad is it? How bad has this year's crop been impacted?
Northey: Well, it's hard to know. We've got a lot of season yet to come. But right now we have about 10% of our corn that has either been flooded out of not planted and about 20% of our beans. We're seeing some beans go back in the ground and if we were to lose that, if we weren't able to replant that would be $2.5 billion, $3 billion, a significant amount of damage. There is also concern about the crop that is growing. Certainly some of that corn out there is small and has been in saturated soils. That isn't really considering any loss to that crop that's growing and there is a concern about that. It depends what the rest of the year brings as far as weather.
Glover: Well, let's flip the question on its other side. If let's say 20% of the crop is lost or gone that means 80% of the crop is probably doing pretty good and probably going to be drawing a pretty good price. Are most Iowa farmers going to come out of this ahead?
Northey: It depends. There certainly are folks out there with good crops. There's areas with good crops and within all areas there's folks with good crops and poor crops. You can compensate for lost production. Right now we have some tough looking crops in lots of places. Actually some of the beneficiaries of this will be folks with good crops, all their crops in other states. Right now much of Iowa has problems and they may or may not see a positive impact.
Glover: So, even those who will get a crop out are going to hurt because it's not going to be a great one.
Northey: Likely, very likely, Mike.
Yepsen: Mr. Secretary, what are the options available to a producer at this point? I'm a city slicker so help me out. Can you replant a crop now?
Northey: You can, it's hard to replant corn. We were just on the phone today with some of the Iowa State folks. If you try to replant corn now, the middle of June, you could expect 50% to 60% of yield, not terrible, that's worth getting something in the ground but you also have a lot higher risk of frost clipping that at the end of the season. The other challenge you've got is you've got crop insurance regulations that maybe actually discourage you from replanting that crop. As far as beans it's easier to replant beans now. You still have a risk of frost in the fall and the challenge of short season beans. But there is a chance to get some beans in the ground and we are seeing some of that happen right now.
Yepsen: Is one option here to use a dispiriting term to farm the government, to not put a crop in and get insurance and be done with it?
Northey: Most of the producers want to be able to get a crop in partly because of these prices. We want to make sure that folks are making the decision to get every acre in that they can. There can be regulations around crop insurance that cause producers to think whether I'd actually make more money taking that crop insurance than not than trying to replant. And so we want to make sure and we asked for on Monday an extension of the planting deadline for soybeans. Right now every day that you don't get soybeans in your guarantee goes down, that causes folks to be thinking about not replanting. We want to see some of those things happen. We haven't heard anything positive for the changes.
Glover: What has to happen between middle of June where we are now and the rest of the planting season to make even replanting possible? What do we need to see out of the weather?
Northey: Well, we need dry weather right now to be able to get that crop in. And then we do need good weather the rest of the year, not saturated soils, we need to be able to dry those soils out but we do still need rain so we don't want this soil to dry out because we have shallow roots out there and then we need a late frost. We don't need a frost at normal time, October 1st, we need it the middle of October or even later to make sure that this late maturing crop has time to mature.
Borg: Is there a supply, though, of fertilizer, herbicides, seeds in order to even replant?
Northey: Generally there is. There's some question on the seed side as far as the maturities is that the seeds that you replant now are different than those that you would have planted a month ago. And so there's some challenge to that. We're generally finding that folks that want it can get it. There are still some shortages as far as the grain side, on the corn, the short season corn.
Borg: I'm wondering also about those who are processors and purchasers of the farm crop. In Cedar Rapids Quaker Oats plant was flooded, Penford Products, ADM Corn Sweeteners has also had some effect on their plants and I'm sure that is replicated elsewhere in Iowa, the John Deere plant in Waterloo, for example. Speak to that and the affect on agriculture.
Northey: It's very significant. I think we're just starting to hear some of those things, just starting to figure out. Those change markets and in many cases those losses if they are by flooding in some cases those are not covered by insurance the same way homeowner losses by flooding are not covered by insurance. So, we're seeing loss in some of those facilities, we're hearing of grain bins whether they're at a processing facility or on farms where that corn is still or those soybeans are still in the bin. Water gets in there, it swells, it can break the side of those bins open. We've got some things to work through.
Borg: We haven't even spoken of the ethanol industry. How is that going to be affected by what has happened? If corn goes too high they can't afford to buy it and make it economically into fuel. But also are there other affects?
Northey: Right now we have about 300 to 400 million gallons in the ethanol industry that is not processing because they are in a flooded situation. That is out of 2.2 billion gallons in Iowa. So, it's significant, it's not all the industry. The rest of the industry is all paying higher prices, if they hadn't already bought their corn they're paying higher prices and these kinds of prices are not profitable to produce ethanol at the current ethanol price. Now, they'll keep doing that for a little while, there will probably be some decisions of whether they want to keep processing or not at these prices but who knows what the prices are two months from now or two weeks.
Glover: Let's step back for just a second and look at the long-term here. Have we learned any lessons from this flood? Have we seen places in flood plain areas where we maybe have concluded that's not a great place to be planting corn, this is not a great place to be farming, it's a place that's going to flood fairly often? What are the long-term lessons we've learned from all this?
Northey: I think generally those are good places to plant corn. This happens once in a while. It's still better to have it 14 years out of 15 if you can have that. It may not be the best place to build all our facilities and there will be lots of discussions around that or homes and those kinds of issues that will be talked about. I think generally it's hard on that farm when you lose that crop but that maybe is a better alternative than some of the other things that we can do with it and we need crops, we need to be able to have those acres available for production.
Yepsen: Mr. Secretary, what do you see as the impact on state tax revenues? First glance it takes a hit because there's just a lot of damage, a lot of productivity loss but then there's also a plus side. The price of corn has skyrocketed. There's going to be a lot of insurance money dumped into this state to rebuild things, fix things up, trades people are going to be working. How does this all balance out in your mind? Is this a plus or a minus to the state treasury?
Northey: I'm sure that it's a minus, net minus. There certainly will be some folks that are positively impacted as they are trying to rebuild but you think with the corn price going up there's buyers of corn in this state as well so some of the sellers may get a higher price depending on what the production finally ends up being and when they sell. But the buyers whether they're ethanol plants or a livestock producer in this state are buying significantly more expensive products. And generally with insurance, certainly crop insurance and most of the other insurance out there, if you have to take insurance you've taken a significant loss before you get to qualify insurance.
Yepsen: What's happened to the livestock? How much damage? And then talk about the prices.
Northey: There's a little bit of damage in those areas that have been -- there's significant damage in those areas that have been flooded. Overall it's not a huge portion of the industry but the rest of the industry is paying the higher prices. And especially the hog industry -- we were getting to the point where they were kind of able to manage $5 corn and now it's $7 corn or nearly $7 corn and it is really, really hard for them to be able to absorb that and figure out how they're going to manage these higher prices.
Glover: Let's balance the responsibilities here. You've got the federal government which will probably bear the bulk of the financial responsibility for recovering from this flood in the state. There's talk in the state of having a special session of the legislature in the next couple of months to react to this. I took a look the other day and in '93 after that flood there was about $1.5 billion in assistance that came in, about $14 million from the state, far less than even charity. Why bother with a special session? Isn't it true the state is not going to do very much?
Northey: Well, we'll see. I think there has been a lot of interest by lawmakers and by the Governor in figuring out what can be done and there may well be some resources. But certainly from our perspective you've got ag businesses out there and farms, you look at a flooding situation not only is the house gone but the whole rest of the buildings on that farmstead are gone and in many cases with no insurance at all as well as you've got conservation practices and we've been out to look at some of the conservation practices, the terraces, the grass waterways. Some of that helped a lot in controlling the erosion but some of that was damaged as well and we need to repair some of those to be able to get ready for what may be some future rain.
Glover: Will you have recommendations for them?
Northey: We probably will. We actually have a survey out now with the natural resources conservation service, our federal partner, to find out what the damage was to conservation practices. That survey is out to each of the counties. We should get the information back next week and know how many dollars worth of damage to those practices out there and that will give us some guideline about what kinds of needs there are. And we'd likely be asking for some help for that.
Yepsen: Mr. Secretary, you mentioned how it's going to be necessary to plant row crops on flood plains. What about the wisdom of putting hog confinements on those flood plains? We see these pictures of flooded confinements, hogs rooting up levees, they're having to shoot hogs that escape and root up the levees. Is it time to rethink the whole notion of putting hog confinement facilities in these flood plains?
Northey: I think it's hard to make decisions based on this kind of event. This was so horrific and well beyond what we're used to. If we didn't do some of the things that this storm might tell us to do we wouldn't do it in an awful lot of areas in the state. We need to do some of those things. I think maybe it makes some sense to analyze some of those things. But you look at what producers did in southeast Iowa. We had a few hogs that absolutely folks let out of their buildings. There were 37,000 hogs evacuated out of buildings, moved to other buildings in a matter of a few days to be able to get them out of areas that had the potential to flood. No one knew if it was going to flood. They evacuated those hogs and when that flood came there were some buildings that got inundated, there were a few hogs that were lost in those buildings, there were a few hogs that were let go trying to see if they could be saved and some were picked up on the streets. But we had some that didn't make it just like we have pets and other kinds of animals and other kinds of consequences out of it.
Yepsen: I want to go back to the ethanol industry, we've talked about this, and I want to ask a heretical question. Is this ethanol industry still worth it? Two reasons, even before this flood there was a debate starting over the wisdom and the morality of using food for fuel, food prices going up all over the world. It's a pain for us but for poor people in other countries there's real nutrition issues, malnutrition. Now with $7 corn why would, as Dean points out, how can you afford to run these plants with that kind of corn? Is it time for Iowa to rethink the wisdom of this big bet on ethanol?
Northey: I think the ethanol industry has been great for this state for lots of reasons. And the $7 corn came because we got too much rain, it didn't come because we had ethanol. Now, it contributed to the demand for that corn and it contributed to the price that we got to before that. But the alternative is to look back to those times of the 1980s where we had piles of corn building every year and we were depending on the government to buy $1.80 corn and I don't think anybody wants to go back there. I think we need to have that demand for our crop, we need to look at the way it works in these times of short prices or short crops and high prices but we need to be able to have that demand long-term, well beyond the impact of this short-term weather.
Yepsen: Can this industry survive without federal subsidies and tariffs on imported ethanol?
Northey: Well, we'll see. I think it depends on what the price of ethanol is, it depends on price of what the corn is. Right now the dynamics are it's pretty tough to be able to make it buying $7 corn and selling $2.50 ethanol.
Borg: I wanted to pick up on Dave's word on survive. Are there operations, livestock operations, you mentioned the stress in hog feeding right now with high priced corn and also exacerbated by the flood losses and so on in some areas. Are there areas that you think are not going to survive. And is there a place in something like that -- we're in a special session, legislation working with the banking industry and the financing industry the state might be able to guarantee loans and things like that. I'm just fishing, if you will.
Northey: And I don't think we necessarily know all those numbers. We're trying to collect those for what those losses are out there. I don't know that there's industries, other than the livestock industry certainly is under some stress right now with these prices, but it depends where you're at, it depends whether you bought corn ahead. There certainly are individuals within all those industries that are in more dire circumstances than others. You look at those areas that were flooded especially grain processing, elevator areas, elevators in those flood plains, other that got flooded that have significant losses that are uninsured, they are going to need some help to be able to survive and I don't know exactly what that will be yet, we're still trying to analyze what the cost is and how to craft a program that targets just those that are in the most need.
Glover: Let's look at another segment of Iowa that is affected by this and that is our farm to market road system. Iowa has among the highest number of miles of roads anywhere in the country largely because of the need to deliver farm products to their markets. How badly has that been damaged and what is the state's role in putting it back together again?
Northey: I think there is a role and I don't know for sure how badly it's been damaged. I think we need to find out from the supervisors out there and the county engineers that really has a separate role than the Department of Transportation. They work on the primary roads and those railroads. So, I think there's some work being done right now to find out what that is. Anecdotally as we talk to supervisors there are some areas there's been significant damage whether it was ditches that filled in or culverts that were washed out or bridges where abutments were lost and we're having roads that are closed right now as well as roads that are damaged and vulnerable to the next storm.
Glover: Right and how lucky are we, if we could turn that question on its ear just a little bit, because of the time of year that this happened? In 1993 the flooding happened in July and August right before the harvest season, right before delivering product. This is June, we still have the rest of the summer and fall. Is that a break that the state caught because it happened this early in the season?
Northey: Well, it may be a little bit of a break but it's pretty hard to get all the work done before fall still. At least we've got a little bit more time than we did then but there's a lot of work to do and it's hard to even find enough contractors to do all that work let alone get the dollars together to get that done. But I think it helps a little bit, Mike.
Yepsen: Mr. Secretary, we've been talking our whole conversation about the government and what government should do. We're in Iowa. Iowans like to think of themselves as individuals. As you look at this disaster what do you want individuals to do differently going forward in how they run their business, their farm, their personal lives? Is there any lessons that we should take out of this as individuals?
Northey: Well, I think as we talk to producers out there they want to solve their own problems first. In some cases those problems are so huge they need some help to be able to solve them. None of them expect to be able to be made whole as if nothing happened. All of them expect to have turned this which had the promise of being maybe one of their best years ever farming, they just want to survive after this year.
Yepsen: So, what do they do? My question is what should they be doing differently?
Northey: I think they should certainly have better weather coming into it. I think some of this was absolutely uncontrollable. Some of it was if you protect yourself so much, if you are ready for every potential event that could happen once out of every hundred years or 500 years you're probably not going to be able to be in business and make it on a normal year. So, some of this is just flat out unpredictable. We need to find ways to be able to help soften the blow for some of the folks out there. And frankly some of them this is going to be almost too much for them to be able to come out of.
Glover: Iowa has Iowa State University, bills itself as one of the nation's great institutions of land grant colleges. What is their role in this? Have they done all they could do to make the state ready for an event like this and in recovering from an event like this?
Northey: I think that they have. Again, recognizing that these are almost impossible to predict and if you did everything every year on the chance of every disaster you'd inundate everybody but they have been very active, we were on a call this morning on what to do for producers. They've got information out about what to replant, what they expect the yields are, what kind of maturity of crops you should be using now instead of a month ago. What would milo do? What would some of the non-traditional crops do to create some feed grains for some of the livestock? They've been having meetings, regional meetings in some of the areas, they have planned additional meetings in talking about the response to crop insurance, the response to the loss of buildings and other assets that are out there so I think they're doing everything they can just like everybody else that is a part of this.
Glover: And will this event winnow out the state's farm population? Are there people, livestock producers, grain producers that simply won't make it?
Northey: These are awful tough changes to absorb quickly. In fact, we were at really kind of a challenging time already getting used to higher priced corn and soybean meal and producers getting used to higher cost inputs and you add this on top of it. There's going to be some that have a real hard time absorbing these significant changes. There are some livestock producers that are going to have a real hard time absorbing these extra prices if they're having to buy all their feed right now at $7 or there's some short hay crops, there is concern about the hay prices that are out there. So, I think it presents some significant challenges to individuals, again, remembering the state is big, we have 90,000 farmers. If it's one percent of the population that's still 9000 farmers out there, that would be ten percent of the farmers, if it was one percent that's still 1000 farmers out there that are ...
Yepsen: Well, is it going to be one percent or ten percent?
Northey: I think it's closer to one percent that are significantly affected by that drowning out and have the huge casualty losses, it's significantly more than that when you look at those that have field losses and are impacted by either haying problems or crop problems, way more.
Yepsen: Mr. Secretary, what is the silver lining in this? As I mentioned we're all Iowans, we like to look at the bright side, I've heard people talk about this is going to force some communities to redevelop areas, for example, to harden water plants, to get serious about disaster preparations, maybe some neighborhoods will be changed and come back better. What is the silver lining here?
Northey: It's a challenging time in the midst of that to see it all and you've got producers out there that are looking out at crops that are in some trouble in some cases. It's tough to do that. For agriculture we're optimistic, we put a crop in the ground not knowing what the weather is going to be. Now, we never expect this kind of stuff but we know it can happen. And one of the nice things for farmers is this fall this crop will be over, we'll be back to another crop next year. I think we do have a chance to talk about better preparation and what we do market wise to be able to look at having enough rain to be able to feed our livestock and satisfy some of the folks that are buying out there. I think this will create some policy discussion that is valuable. The challenge is do you create it in such a dynamic environment that you do something that you wish you hadn't done a handful of years from now because you react to the short-term situation.
Yepsen: And we do talk politics on this show, as you know. You're an elected official, a Republican. What is the political fallout from this flood?
Northey: I don't know that there -- I don't know what it is, I don't know ...
Yepsen: Does this change the issues that we talk about?
Northey: Well, it probably brings the infrastructure issue back closer to the front of the table. We had that a little bit after last year and after the Minneapolis bridge and there's certainly discussion around gas tax and what do we do for infrastructure in this state, we've challenged that infrastructure a lot with these kind of storms. I think that brings that issue maybe a little bit to the forefront.
Yepsen: John McCain was criticized by some for showing up, some Democrats have said that it could take away from the security efforts. What do you make of that? Do you see a distraction to the security?
Northey: I think the attention is good. Certainly the President was in town, that takes a little security too and others will be here and I think it's important to be able to have the attention on the issues.
Glover: You're a Republican, let's be realistic and look at the map this year. You haven’t' found a really serious candidate to run against Tom Harkin. He's looking like he's a pretty sure bet for re-election. I don't hear a lot of talk about a potential Republican opponent for Chet Culver in two years. You've got two freshmen Democratic congressmen that look to be pretty good bets for re-election. What is the health of the Republican Party in this state? It looks to me it's a little on hard times right now.
Northey: I mean, there's no secret, had a tough election a two years ago. I was part of that, I survived through that process but that was a tough election. When you lose congressional seats, you lose open seats, I think it has its challenges but I think it's getting its feet back on the ground. We'll see what comes up two years from now. I think there is a significant opportunity to be able to get the Iowa House back for the Republicans this fall. We'll see how that happens but I think it can happen.
Glover: Can John McCain beat Barack Obama in Iowa?
Northey: I think he can. Now, I think it's going to be a challenge and I'm certainly a strong supporter of McCain in that race. I think we've got issues on ethanol and other issues that are out there that will impact that race. But I think he can win the state of Iowa.
Yepsen: Does the Electoral College math help Iowa in the upper Mississippi in dealing with this flood? Wisconsin, Iowa, Missouri, all battleground states, all toss up states. I mean, there's a reason why John McCain was here, it wasn't just looking at the flood, he's seen those before. Will this help us convince Washington that Iowa does need some assistance?
Northey: I think it will help. I do think that we're going to get that attention to some extent anyway. We are the number one corn state, soybean state, hog state, egg state, number two overall in gross ag receipts, $20 billion a year. We're going to get some of that attention just because Iowa matters and ag matters. But it doesn't hurt as well to be a battleground state.
Glover: And we've only got about 30 seconds left, let's look at Bill Northey. As you mentioned, you survived the last election, a very tough election for a Republican and you showed you can win in that environment. What is your future? Is there a Governor Bill Northey coming up?
Northey: Right now there's a Secretary of Ag and that's all -- I enjoy that. I can't think of anything I'd rather do more and I'm looking forward to being the Secretary of Ag as long as Iowa wants me to.
Glover: Who is your candidate for Governor?
Northey: We'll see how that plays out. As you say, who knows who's on the list.
Borg: And you're glad there were only 30 seconds.
Northey: That's right. Aren't we about out of time?
Borg: Well, we are. Thanks for being here today. That's it for this weekend's edition of Iowa Press. I hope you'll watch next weekend, of course, the usual times, 7:30 Friday night and 11:30 Sunday morning. I'm Dean Borg. Thanks for joining us today.
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