In an industry already ravaged by fallout from the pandemic, Wyoming ag producers are now up against Mother Nature as most of the state and West are plagued by severe drought. The lack of moisture, coupled with parched pasture and range conditions, has led to record hay prices as many ranchers are faced with the hard choice of culling herds and selling off calves early.
Starting in May, the United States Department of Agriculture designated most Wyoming counties as primary natural disaster areas, with moderate to severe drought, particularly in the northeast and northwest corners of the state, as well as counties in the south and southeast.
The most recent crop survey published by USDA on Aug. 8 rated Wyoming’s pasture and range conditions at 67% very poor to poor, compared to 8% in the good or excellent category. Similarly, topsoil moisture conditions fell largely in the very short to short moisture category at 72%, versus 28% of pasture or rangelands showing adequate or surplus moisture.
“This year is one of the worst drought years I’ve seen in 65 years,” Clyde Bayne said. Bayne is a rancher in northeast Wyoming and an insurance agent with Mountain West Farm Bureau insurance, based in Newcastle.
Crop insurance is one way to mitigate loss brought on by drought and other weather hazards, which is made affordable only because it’s heavily subsidized by the federal government, which covers roughly 60% of the rancher or farmer’s premium. Crop insurance is overseen by the Federal Crop Insurance Program and administered by the Risk Management Agency, with policies sold and serviced through private sector insurance companies.
In 2020, 7.3 million acres in Wyoming were insured for more than $171 million in protection, according to National Crop Insurance Services. Of those insured, Wyoming farmers paid $10.6 million for coverage, with more than $30 million paid out by insurers to cover losses and an additional $24.6 million paid for liability protection for crops. By the same figures, Wyoming crops contribute $1.5 billion to the economy.
Premiums are based on a 20-year average of loss costs, according to Laurie Langstraat, vice president of public relations at NCIS, who said the formula varies widely per crop, region and commodity prices, and that one bad year is not necessarily going to have a huge impact on a producer’s premium.
In July, the RMA authorized emergency producers to streamline and accelerate indemnity payments to crop insurance policy holders in drought-impacted regions in Wyoming and across the United States.
Policies come in all shapes and sizes, and cover more than 100 different kinds of crops, as well as livestock, rangeland, equipment and a variety of anywhere from 40% to 75% coverage, as well as other variables to protect loss margins, Bayne said.
“It’s the most dangerous product to market in the insurance industry,” Bayne said. “The government gives you a deadline to meet, and you have to be accurate.”
Another huge problem with the industry itself, Bayne said, is the lack of drought measuring points RMA monitors in the state, which are typically places near tributary systems, and thus not indicative of the various ecosystems across all Wyoming counties. Because these measuring points are used by the agency to measure drought, the calculations don’t accurately interpret what’s actually happening on the ground.
This is true not just in Wyoming, but in the Dakotas and eastern Montana. He said he’s pointed this out to RMA for the past 20 years, and though they agree with his assessment, they’ve nonetheless done nothing to correct it.
“For a pasture range and forage program to work effectively,” he said, “they need to have enough points to interpret the conditions correctly.”
Despite its imperfections, these insurance programs have helped keep Wyoming ag producers in business.
This year, Bayne said he’s heard from more producers than ever, including those who have never had coverage. The bulk of his customers in the northeast corner of the state are for forage or pasture land, with most, if not all, filing claims this year after record-low cuttings and through-the-roof hay prices of anywhere from $250 to $350 a ton.
“Most producers in Wyoming have had a hard time,” he said. “I’ve never seen hay this expensive, and people are having to go farther and farther away to purchase it.”
Hay has taken the hardest hit of all Wyoming crops, according to Rhonda Brandt, state statistician for USDA; it is also the state’s biggest crop at around 1 million acres, including alfalfa and other varieties. Winter wheat is the state’s second-largest crop at about 120,000 to 140,000 acres, followed by corn that ranges from 80,000 to 100,000 acres, Brandt said.
In terms of production, as of Aug. 30, only 50% of all alfalfa fell in the good to excellent quality, the designation used to determine prices, compared to a five-year average of 75% for this same time and 60% last year.
On the opposite spectrum, corn is doing exceptionally well this year, particularly for the producers in the irrigated pastures in the southeast that haven’t been hit as hard by drought conditions experienced in other parts of the state.
According to the USDA crop progress report for the last week of August, corn production sat around 93% for the highest-quality product, compared to a five-year average of 79%.
Corn has also benefited from less hail and wind to damage it this year, Brandt further noted, along with fewer diseases.
“Corn is cruising,” she said. “It’s doing quite a lot better this year, unlike some of the other crops.”
Perhaps the only benefit to arise from the drought is that the designation grants producers eligibility for a variety of assistance programs administered through the USDA Farm Services Administration that extend emergency credit and loans up to $500,000 for various recovery needs, from recouping loss to replacing equipment or livestock.
There are a number of drought relief programs, according to Andrea Bryce, program specialist with Wyoming FSA, from funds set aside through the Coronavirus Food Assistance Program, designed to help producers impacted by COVID-19. Eligible producers were allowed to apply for payments up to $500,000, depending on annual yields, number of shareholders and livestock numbers. In 2020, CFAP paid out just under $186 million in two disbursements to ag producers in all 23 counties that do not have to be repaid, with the next deadline for application for 2021 funds due in mid-October.
Other federal disaster assistance programs, such as the Livestock Forage Disaster Program and Non-insured Crop Disaster Assistance Program, among others, have also been disbursed, for a total of just under $54 million to date, with an anticipated $50 million to be disbursed this year.
The majority of these programs are directly tied to the USDA Drought Monitor, Bryce noted, as the state experiences its second year of drought. Farmers on irrigated land have done much better, with the bulk of the programs designed to help dry farmers and producers on non-irrigated land.
“Markets have really been impacted by the pandemic,” Bryce said, noting that in her 20 years on the job, this year is by far the busiest. “When the supply chain broke, it really wreaked havoc. And now the drought.”
Nonetheless, she said she hears all the time about how great the hay is in Wyoming when she travels and is not deterred by a couple hard years.
“This is a great state when it comes to agriculture,” she said.
The impact on a producer varies wildly based on their location within the state, said Brett Moline, director of public and government affairs for the Wyoming Farm Bureau Federation.
“The irrigated farmers are doing just fine,” he said. “Corn really likes hot weather, and if you’ve got the water, you’re in good shape.”
Dryland farmers, however, really got hit hard this year. Moline cited his brother’s ranch in Aladdin, where he yielded only about 10% of his hay crop due to hot weather and parched pastures.
This, coupled with the high price of hay, is prompting many ranchers to cull their herds and sell off calves at 50 to 75 pounds lighter. Along with smaller profit margins, despite the relative decent calf prices, most ranchers will not recoup their money, and it may take years to build back their herds, Moline said.
Another year of drought will further take a toll on the ag industry, he said, but then again, he’s optimistic about opportunities to help the industry by increasing the number of processors in the state and finding more markets to export Wyoming beef and other products.
Regardless, Moline said, the biggest problem is that the industry is reliant on weather, over which they have no control.
“Ag has always been a low-margin industry,” he said, “and always will be.”
Bayne seconded the impact the two years of drought have had on cattle ranchers, noting those who have leveraged to the hilt in bank loans may not be able to survive.
Conversely, Bayne, who has been both ranching and selling insurance for the past three-plus decades, is hardly discouraged by gloomy predictions in the short term.
“We are among the most optimistic people in the country,” he said. “We take the biggest risks, and we love what we do.”