The Famine Of 2009 ?  

Neal at DailyKos has an article on problems facing farmers in North Dakota. The "great famine" headline might be overdoing it, but it certainly sounds like corn and soy production will be under pressure next year - The Famine Of 2009 (via Idleworm).

The fall nitrogen fertilizer application has been 10% of the norm. A typical year would see 50% put on in the fall and 50% in the spring. During fertilizer application season the 3,100 mile national ammonia pipeline network runs flat out and the far points on the network experience low flow both fall and spring. If they try to jam 90% of the fertilization into a period of time when the system can only flow a little more than half of the need much of our cropland will go without in the spring of 2009.

Finances as much as weather are the issue with regards to fertilization this fall. Crop prices have fallen to half of what they were, ammonia prices have dropped but ammonia suppliers here, receiving 75% of their supply from overseas, still have product in their storage tanks purchase at the historical highs last spring and summer.

When farmers plant they record the acreage and they purchase crop insurance - $20 to $40 an acre depending on the crop. If they have a failure they file a claim, an adjustor contacts them, and they get a check to cover the deficit. Some of this runs through the U.S. Department of Agriculture and some of it is through private insurers.

My conversations with farmers earlier this week lead me to believe that the largest private insurer, Des Moines Iowa’s Rain and Hail Agricultural Insurance may be insolvent. Flooding claims from this spring were filed and payments would have typically been received by the end of June or beginning of July. It’s now the end of November and payments are not being dispersed. Individual farmers are told there was something wrong with their paperwork, but this is nonsense – some of these guys have been farming thirty years and they all didn’t forget how to fill out a simple form all at the same time. Iowa did have its second five hundred year flood in a decade and a half this spring which certainly has something to do with the situation, but I suspect Wall Street’s sticky fingers got hold of Rain & Hail’s assets, just as they’ve done to every pension fund and state run municipal investment pool.

So, we’re already facing what Bryan Lutter calls “the mother of all fertilizer shortages” next spring and on top of that local banks won’t lend to farmers.

The local bank was quite willing to lend to a farmer on a crop despite the weather related risks just like they’d lend on a car despite the driving risks. So long as the asset was insured the risk was deemed manageable. There were sure to be losses here and there, but they’d be administrative hassles associated with well known risks. If the auto insurance companies were viewed as untrustworthy no one would be getting a car without 100% down at the dealership and the same rule is now in effect for farmers.

Farmers without financing can’t afford nitrogen fertilizer at $1,000 a ton, which translates to $100 an acre at current application rates. They won’t be paying $300 for a bag of 80,000 hybrid corn kernels, again a $100 per acre expense. The average farm size in Iowa is four hundred acres and planting to harvesting would run about $120,000.

This looks incredibly bad. Bryan and I are both puzzled as to why the mainstream media isn’t covering this. Perhaps the need to sell Christmas season advertising trumps the need for the public to know about the troubles that are brewing.