Indiana Farms Facing Flood Losses

Farm Credit pledges to work with producers

LOUISVILLE, KY (June 17, 2008) - Disastrous floods in south central and northern Indiana are creating hardships on farm families and their operations, and though it is too early to estimate the amount of agricultural damages and losses, it is clearly one of the worst natural disasters in the state’s history.

Officials at Ball State University estimate floods have caused more than $126 million in immediate losses.  Their estimate centers on damages caused by flooding around the White and Wabash rivers alone.   However, it does not include agriculture related losses. Prospects for future losses may be even larger because many farms have lost their growing crops – the source of their economic livelihood.   

The immediate issues are safety and being able to return to normal, day-to-day living in much of the state.  Beyond that, there are far reaching economic questions, especially on the state’s agriculture.    

“At Farm Credit Services we are concerned not only for our customers, but also for all farm families hit by this disaster,” President and CEO Donnie Winters said.     That concern extends to the Indiana farm and rural communities which have been so harshly damaged by flood waters, he added.  “We are going to work with our producers and do all we can to help them through this adversity.”

For Indiana farm families, immediate issues also include care and safety of livestock, and resumption (where possible) of their farming operations.   The chief concern is that much of the corn crop will not recover and is a total loss.   But farmers also face a myriad of other issues that include handling dead livestock; dispensing milk that may have been contaminated by rising waters; and restoring wells and water supplies that may have been contaminated.

A delayed planting season (due to a wet, cold spring) meant that much of the corn was still at a very early stage when floods hit.  In many cases, the speed of flood waters simply washed the crop away.   But for more acres, the fact that growing plants remained submerged for more than 3 days, means limited chance of recovery.  

Farm Credit Services, based in Louisville, KY, provides farm loans and crop insurance to about 14,000 producers across the state.  Like others, they are waiting on official estimates of flood damages in order to assess the impact to producers.

“Over the past few years, we have been working aggressively to provide more crop insurance coverage to our producers,” said Amy Jackson, Vice President Insurance for Farm Credit.  “Obviously, this kind of disaster shows why.”  Jackson said crop insurance adjusters will be trying to get to the field as quickly as conditions allow.   More than 200 crop claims had already been posted in a few short days and they are rolling in daily, Jackson said.

According to Jackson, producers’ options from this point are confounded by the fact that the last date to plant or replant corn and get full insurance coverage has already passed.  The date for soybeans (June 20) is right on us, she said, and fields are nowhere near ready for planting in these areas.   Jackson said producers may be wary of planting a crop without good insurance coverage.  Twenty-five days after those plant dates, crops are not covered at all.

Other challenges facing producers include the fact that there’s a scarcity of seed supply, and input costs have increased dramatically.  “Switching your strategy to soybeans from corn is difficult for many because corn ground has already been treated,” she said.

Flood and Price Challenges

The impact of the state’s flooding (along with flooding in a greater part of the Midwest) has dealt a double blow to farmers.   On one side it has reduced (in some cases, wiped away) prospects for a good crop that was planted on hopes of a high price in the fall. On another side, wet weather and flooding led to reduced forecasts for the 2008 crop season, and that caused recent corn prices to hit record levels.

Normally such news would be good for farmers.  But this time, it is a double-edged sword.  If you don’t have corn to sell, there’s no profit.  And, if you are a hog, poultry or cattle feeder, the cost of your feed supply just skyrocketed.

According to Phil Kimmel, chief credit officer for FCS, the cooperative has worked with producers in the past, and will continue to do so, to help them overcome the adversity related to such events.

“Every individual’s case will be different, so it’s difficult to prescribe one fix-all solution,” Kimmel said.  “That’s why we tend to avoid special programs that can feel like gimmicks.  Often, they don’t work.”  Rather, Kimmel said FCS has numbers of options that include debt restructuring, loan re-amortization, principal deferment and other steps that can help shore up a producer’s situation and give time for recovery.   As Indiana farmers in these flood zones begin to assess their loss situation, FCS is ready to begin discussions so that the best possible plan can be made.

“The circumstances producers are facing are going to create more credit demands as margin calls increase and some farmers with total crop losses will be faced with having to buy out of contracts at some potentially high prices,” Donnie Winters noted.  “We may also see some further stress among our livestock producers, due to increased grain prices.” 

Winters said FCS is ready and prepared to work with farmers.  “We have a long history and we’ve encountered droughts and weather related problems before.  The up side is there are strong prices for customers who may yet produce a good crop, be it corn or soybeans.  It’s really too early to say how much damage has been done.  We know there are folks who’ve been impacted severely and we certainly intend to work with them.”

The cooperative itself was touched by disaster on June 9 when its Bluffton, IN office was struck by lightning and destroyed in a fire.  No one was injured although staff was in the building at the time.   Winters said FCS intends to rebuild as soon as possible, and the office has resumed operations in a nearby rented facility.

About Farm Credit Services

Farm Credit Services of Mid-America is a $14 billion financial services cooperative serving 82,000 farmers, agribusinesses and rural residents in Kentucky, Ohio, Indiana and Tennessee. The cooperative provides loans for all farm and rural living purposes including real estate, operating equipment, and housing and related services such as crop and life insurance and vehicle, equipment, and building leases. For more information about Farm Credit, call 1-800-444-FARM or visit them on the web at www.e-farmcredit.com.