Obama announces federal aid to help drought-hit farmers

Obama planned a three-day swing through Iowa, a battleground state the Democrat hopes to win in November. He planned to visit a farm in the No. 1 corn-producing state to witness the impact of the drought. The Iowa corn crop is forecast 25 percent smaller than 2011 due to the worst drought in half a century.

Swing states, including Iowa, Ohio, Florida, and Colorado, could hold the key to Obama's White House re-election bid.

The White House also is directing the Department of Defense to "encourage" its vendors to speed up purchases of lamb, pork and beef and freeze the food for later use.

Critical time

"This is a win-win. Farmers and ranchers will have an opportunity to sell more of their products at this critical time and taxpayers will get a better price on food that would have been purchased later," a White House official said.

"The president has directed his administration to continue exploring every possible avenue to provide relief to communities struggling with this historic natural disaster."

Analyst Mark McMinimy of Guggenheim Partners noted the "incredibly fortuitous timing" of the announcement, which he said demonstrated the advantages that Obama has as an incumbent running for re-election. The money for the purchases will come from a fund reserved for helping farmers and ranchers hit by natural disaster.

Last week the governors of two poultry-growing states, Maryland and Delaware, asked the Obama administration for relief from the requirement to use corn ethanol in gasoline, saying the crop was needed to feed livestock.

Impact on livestock prices

The announcement of the purchases, a small amount compared to annual U.S. meat production, had little immediate impact on livestock prices in Chicago markets.

Livestock prices are expected to weaken as the higher cost of corn, soybeans and hay forces farmers and ranchers to send animals to slaughter sooner. On Friday, the government said high feed prices were expected to squeeze returns to producers.

So far this fiscal year, the Agriculture Department has spent $941 million to buy more than 1 billion lbs (453.6 million kg) of food, from apricots and beans to potatoes and walnuts along with meat, eggs and fish, for the school lunch and food donation programs.

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