For Midwest farmers, a disappointing harvest

High fuel costs and drought conditions are dealing a double blow.

The weather for Bernie Walsh's harvest has been close to ideal: an endless run of clear, warm, dry days.

It's a welcome change after the troubling summer drought, and the computer that measures corn yields as his combine slices through the fields gives more good news: he's bringing in more corn than he expected.

"About 155 bushels an acre in this field," he says, finishing up the last row. Far less than the record yields he got last year, but still respectable.

Good news is in scant supply for Midwest farmers these days. Bountiful harvests nationwide have kept prices low, so drought-reduced crop yields are hitting farmers like Walsh especially hard. Even more troubling are the skyrocketing costs of fuel and fertilizer, which will hurt farm profits both this season and next.

Nationwide, agriculture costs this year are $2-3 billion higher than their already high original estimates, says Patrick Westhoff, an economist with the University of Missouri's Food and Agriculture Policy Research Institute.

"The good news is that most producers came into 2005 in reasonably good shape," says Professor Westhoff. "But people had been planning for the good times to continue, and it's a pretty sharp change for them. A lot depends on what they'll have to pay for fuel or fertilizer next spring."

Here in Illinois, many farmers are having better harvests than they feared earlier in the season.

The USDA's October corn predictions for the state rose to 145 bushels per acre, and a recent report lowered the agency's damage estimate for this summer's drought to $701 million, down from last month's estimate of $1.27 billion.

But the harvest's slight improvement does little to ease the financial pressures farmers here are facing.

"It's the classic cost-price squeeze, but the squeeze is a little tighter this year," says John Hawkins, spokesman for the Illinois Farm Bureau.

"Farmers that do have crops aren't getting the price they thought they were going to get. The farmers that don't have crops, don't have the crop and they don't have the price. And they're all facing higher input costs for the coming year because of fertilizer and fuel."

Walsh, for instance, just paid $425 a ton for the nitrogen he needs for his corn. Typically, the price is more like $250 or $300. Federal subsidies will bring the rock-bottom price for corn up from $1.50 to $1.95 a bushel, which will help some, says Walsh, who farms the 200 acres his grandfather bought in 1883 in addition to 800 that he rents. "But still, $1.95 a bushel? Forty years ago we were getting $1.95 a bushel."

He, like many farmers, gets by on efficiency, second jobs, and technology he could not have dreamed up 40 years ago.

He takes acre-by-acre soil samples to test quality, and feeds the information to a computer. Later, when he spreads fertilizer, his software tells the spreader just how much fertilizer to lay on each acre.

Computers also connect him to the marketplace, give him better sources for supplies, and provide a network to other farmers.

Walsh is a seed dealer in the winter, and every year he tests out new strains of grain that give him better yields per acre and are more insect-resistant.

With costs rising and prices falling, "you have to produce more per acre to make a profit," he says. "Twenty years ago, I wouldn't be getting half this much from these fields. Then it would be a disaster."

The growing season in other parts of Illinois might qualify as a disaster. In the state's northwest corner, the rain simply never came, says Jim Ufkin, who farms 500 acres of corn and soybeans in Hooppole.

Now done with his harvest, Mr. Ufkin got slightly more corn than he expected - about 100 bushels per acre - but still far below what he needs to turn a profit, and half of last year's crop. His soybean yields were also lower than usual: 31 bushels per acre, compared with 50 the year before.

"I'm into my crop insurance," says Ufkin. "Even with normal yields, we're going to have problems making a profit next year simply because of the increase in costs."

And with a year that was more than 15 inches short of the normal rainfall, he has no moisture reserve in the soil, and no room for error. "That's concerning me more than anything."

Despite all the difficulties they sometimes encounter, many farmers say they find enjoyment in what they do.

"You have to be an eternal optimist to be a farmer - to have faith that things will be better next year," says Walsh.

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