CHICAGO -- Some farmers are selling off their livestock herds because they can't afford to buy feed, marking a new level of fallout from the drought that will affect consumers and possibly the entire U.S. economy.
The cost of meat at the grocery likely will drop as farmers liquidate cattle and pigs in the next few weeks, but higher pork prices and even shortages could follow in "as soon as six months," says Mike Platt, executive director of the Indiana Pork Producers.
"We're going to see a very tight market" for beef "around the Christmas holidays and into January," says Joe Moore, executive vice president of the Indiana Beef Cattle Association.
When that happens, small meatpacking plants might be forced to reduce shifts or lay off workers just as consumers tighten their budgets after a summer of high air-conditioning bills, says Chris Lehner, a Kansas City, Mo., commodities broker.
"We could see it affecting the whole economy," he says.
The U.S. Department of Agriculture says the nation's cattle herd numbered 97.8 million as of July 1 - the lowest inventory since it began the count in 1973.
The drought, which now affects almost 63% of the contiguous USA, has seared crops and sent corn prices to record highs this week. Soybean prices rose more than 20% in the past few weeks.
A coalition of meat and poultry organizations, including the National Cattlemen's Beef Association, this week asked the Environmental Protection Agency to temporarily waive a federal mandate requiring petroleum blenders to use corn-based ethanol in gasoline. The groups say the move would free up more corn for feed.
When the price of feed is too high to ensure profits later when animals are sold, farmers cull their herds. Platt says some farmers in Indiana, which is among the hardest-hit drought states, are giving away piglets to avoid having to pay high feed prices during the six months it takes for them to grow large enough to be slaughtered.
Moore says some farmers who sell their cattle now might be forced out of business, because it takes 2-3 years to breed and raise cattle for the market. "I'm sure some people are liquidating and they'll be done," he says.
Will Spargo, who raises corn and soybeans on a 3,300-acre farm in Naylor, Mo., says he's keeping his crops alive - but at a high price. He irrigates his corn every three days, up from once a week in a normal year, and has had to shut down pumping from some streams because they ran dry. Seed and fertilizer costs were "up tremendously" this year, he says.
"It's not going to be a banner year by any means," Spargo says.