A Preliminary Analysis of Loss in South Carolina Major Agronomics Crops
Due to Drought in 2002

Todd D. Davis, Hal M. Harris, Charles E. Curtis, and Russ Sutton

South Carolina is experiencing its fifth consecutive drought year. In 2001, even though drought persisted, timely rainfall in major producing areas resulted in excellent crop yields on average. This paper provides a preliminary analysis of the cost of the drought in South Carolina in 2002. This paper only addresses potential primary losses of major agronomic crops. Secondary industry impacts and quality of product impacts are not included.

State Average Yields

Table 1 and Table 2 illustrate the persistent effect of drought on South Carolina crop yields. State average corn yields were below the 10-year average in 1998, 1999, 2000 and 2002 (projected). Yield loss was particularly severe in 1998, at 53% of 10-year average, and is projected to be 55% of the 10-year average for 2002 (Table 2).

Table 1. South Carolina State Average Yields for Major Agronomic Crops from 1992-2002.^1/

Year

Corn

Soybeans

Wheat

Cotton

Peanuts

Tobacco

Bu./Acre

Bu./Acre

Bu./Acre

Lbs./Acre

Lbs./Acre

Lbs./Acre

1992	88	22	47	565	2,500	2,160
1993	40	15	38	495	1,750	2,130
1994	85	27	50	846	2,900	2,300
1995	91	24	32	528	2,800	2,100
1996	79	25	45	774	3,100	2,310
1997	95	22.5	50	688	2,900	2,340
1998	40	21	32	587	2,450	2,050
1999	70	20	43	428	2,300	2,000
2000	65	25	49	627	2,950	2,390
2001	108	22	43	686	3,000	2,450
2002 (Estimated)2/	42	18	44	504	2,600	2,000
10-Year Average	76	22	43	622	2,665	2,223

Source: USDA: NASS. State-Level Yield and Production Data.

^1/ Yield does not reflect the reduced quality associated with drought conditions.
^2/ National Agricultural Statistics Service. USDA. Crop Production. CR PR 2-2. August 12, 2002.

Similarly, cotton, peanut and tobacco yields were below their 10-year average yield in 1998, 1999 and 2002 (Table 1). The average 2002 cotton yield of 504 lbs./acre will be the third lowest yield since 1992 (Table 1). On a percentage basis, peanut yields were 92, 86, and 98% of the 10-year average yield in 1998, 1999, and 2002, respectively (Table 2). Tobacco yields were 92%, 90%, and 90% of the 10-year average yield in 1998, 1999, and 2002 (Table 2). Soybean yields have been 94%, 89%, and 81% of the 10-year average year for 1998, 1999, and 2002, respectively (Table 2). Wheat is a cool season crop and is harvested in late spring and early summer. Thus the effect of the drought on wheat has been minimal. Wheat yields have been at the 10-year average level, or above from 1999-2002 (Table 2).

Table 2. Percentage of 10-Year State Average Yields for Major Agronomic Crops 1992-2002.

Year	Corn	Soybeans	Wheat	Cotton	Peanuts	Tobacco
1992	116%	98%	110%	91%	94%	97%
1993	53%	67%	89%	80%	66%	96%
1994	112%	121%	117%	136%	109%	103%
1995	120%	107%	75%	85%	105%	94%
1996	104%	112%	105%	124%	116%	104%
1997	125%	101%	117%	111%	109%	105%
1998	53%	94%	75%	94%	92%	92%
1999	92%	89%	100%	69%	86%	90%
2000	85%	112%	114%	101%	111%	108%
2001	142%	98%	100%	110%	113%	110%
2002	55%	81%	103%	81%	98%	90%

Marketing-Year Average Prices

Cash market prices at harvest were estimated using historical South Carolina cash market basis information (Table 3). The expected harvest cash price is the futures market price plus the cash market basis at harvest. The expected harvest time loan deficiency payment (LDP) is estimated using historical South Carolina posted county price basis data (Table 3). Cotton is the only commodity expected to trigger a 2002 harvest time LDP of $0.1709 per pound (Table 3) at this writing.

Table 3. Basis and Price Parameters Used in Estimating Harvest Cash Price and Harvest LDP's.

	Cash Market Basis	Posted County Price Basis	Futures Market Price 1/	Expected Harvest Cash Price	Expected Harvest LDP 2/
Corn	$0.00	$-0.17	$2.66	$2.66	$0.00
Soybeans	$-0.40	$-0.31	$5.52	$5.12	$0.00
Wheat	$-0.30	$-0.43	$2.90	$2.60	$0.00
Cotton	$-0.035	$-0.08	$0.4426	$0.4076	$0.1709
Peanuts	Na	Na	Na	$0.1775	Unknown3/

^1/ Futures Market Price on 8-19-2002.
^2/ LDP calculated using loan rates of $2.18 for corn, $5.03 for soybeans, $2.45 for wheat, and $0.5335 for cotton.
^3/ LDP calculation parameters have not been released for peanuts at this writing.

Besides experiencing lower than average yields, South Carolina producers have also received below average prices for most of the 1998-2002 period (Table 4 and Table 5). Corn prices have been 81%-92% of the 10-year average from 1998-2001. However, the 2002 harvest price is expected to be slightly above the 10-year average (Table 5). Soybean prices have been 74%-90% of the 10-year average from 1998-2002, while wheat prices have been 77%-87% of the 10-year average from 1998-2002. Cotton prices have declined significantly from 1995 and 1996.

The expected harvest peanut price is the loan rate for peanuts. The peanut price is significantly lower in 2002, which reflects a policy change from a quota system to a cash market price. Potential peanut LDP data are not available because calculation parameters have not been released for peanuts at this time. Similarly, tobacco is a program crop and the price has been influenced by production contracts over the past two years.

Table 4. South Carolina Marketing-Year Average Prices for Major Agronomic Crops,
1992-2002.

Year	Corn	Soybeans	Wheat	Cotton	Peanuts1/	Tobacco 2/
	$/Bushel	$/Bushel	$/Bushel	$/Pound	$/Pound	$/Pound
1992	$2.30	$5.44	$3.20	$0.5630	$0.2900	$1.6990
1993	2.75	6.52	2.80	0.6070	0.2850	1.6620
1994	2.40	5.47	3.00	0.7230	0.2740	1.6900
1995	3.40	6.93	3.60	0.7970	0.2980	1.7790
1996	3.55	7.40	4.35	0.7380	0.2450	1.8220
1997	2.79	6.55	3.20	0.7010	0.2870	1.7350
1998	2.40	5.00	2.60	0.6590	0.2760	1.7110
1999	2.29	4.70	2.30	0.4550	0.2670	1.6910
2000	2.10	4.50	2.40	0.5500	0.2540	1.7660
2001	2.10	4.20	2.30	0.4100	0.2570	1.8410
2002 3/	2.66	5.12	2.60	0.4076	0.1775	1.7600
10-Year Average	$2.61	$5.67	$2.98	$0.62	$0.27	$1.74

Source: NASS. USDA. State-Level Prices.
^1/ The 2002 Farm Bill eliminates the peanut quota system. The 2002 expected price is the marketing loan rate established in the 2002 Farm Bill.
^2/ Tobacco Price is based on quota price.
^3/ Estimated using information in Table 3.

Table 5. Percentage of 10-Year Marketing Year Average Price for Major Agronomic Crops,
1992-2002.

Year	Corn	Soybeans	Wheat	Cotton	Peanuts 1/	Tobacco 2/
1992	88%	96%	108%	91%	106%	98%
1993	105%	115%	94%	98%	104%	96%
1994	92%	96%	101%	117%	100%	97%
1995	130%	122%	121%	128%	109%	102%
1996	136%	130%	146%	119%	90%	105%
1997	107%	115%	108%	113%	105%	100%
1998	92%	88%	87%	106%	101%	98%
1999	88%	83%	77%	73%	98%	97%
2000	81%	79%	81%	89%	93%	102%
2001	81%	74%	77%	66%	94%	106%
2002	102%	90%	87%	66%	65%	101%

^1/ The 2002 Farm Bill eliminates the peanut quota system. The 2002 expected price is the marketing loan rate established in the 2002 Farm Bill.
^{2. /} Tobacco Price is based on quota price.

Value of Agricultural Production

Table 6 and Table 7 illustrate the combined effect of below average yields and below average prices on the value of agricultural production for the major agronomic crops. The production value for corn has been below the 10-year average from 1998-2002 (Table 6 and Table 7). Similarly, the value of agricultural production for soybeans, peanuts and tobacco has been below the 10-year average each year from 1998-2002. The value of cotton production has been declining steadily since 1998, with an increase in value in 2000.

The projections for 2002 indicates the value of South Carolina agricultural production will be depressed for corn, soybeans, cotton, and peanuts. Wheat is the exception, with average yields and above average prices for 2002.

Table 6. Value of Production for the Major Agronomic Crops produced in South Carolina,
1992-2002.

Year

Corn

Soybeans

Wheat

Cotton

Peanuts

Tobacco

($1,000)

1992	$70,840	$80,186	$41,360	$61,074	$9,425	$190,832
1993	26,400	50,856	27,664	59,492	6,983	184,083
1994	70,380	85,660	54,000	136,400	9,933	182,689
1995	81,991	88,150	32,256	143,919	9,178	186,795
1996	106,571	99,900	52,853	161,082	7,975	214,650
1997	86,141	84,004	48,000	137,934	8,739	219,235
1998	26,400	52,500	19,968	110,634	7,776	157,840
1999	44,083	42,300	21,758	61,343	6,755	131,898
2000	38,220	48,375	22,932	100,007	7,493	143,505
2001	54,432	39,732	20,769	83,253	7,864	144,334
2002 1/	32,399	39,629	54,912	60,602	4,846	109,120
10-Year Average	$60,546	$67,166	$34,156	$105,514	$8,212	$175,586

Source: NASS. USDA. State Prices.
^1/ Estimated.

Table 7. Percentage of 10-Year Average Value of Production for Major Agronomic Crops Produced in South Carolina, 1992-2002.

Year	Corn	Soybeans	Wheat	Cotton	Peanuts	Tobacco
1992	117%	119%	121%	58%	115%	109%
1993	44%	76%	81%	56%	85%	105%
1994	116%	128%	158%	129%	121%	104%
1995	135%	131%	94%	136%	112%	106%
1996	176%	149%	155%	153%	97%	122%
1997	142%	125%	141%	131%	106%	125%
1998	44%	78%	58%	105%	95%	90%
1999	73%	63%	64%	58%	82%	75%
2000	63%	72%	67%	95%	91%	82%
2001	90%	59%	61%	79%	96%	82%
2002	54%	59%	161%	57%	59%	62%

Preliminary Estimate of the Economic Loss Due to the 2002 Drought

The economic cost of the 2002 drought is estimated as the per acre yield loss, from the 10-year average yield, multiplied by the expected harvested acres and expected harvest time price. The value of lost LDP is the per unit LDP multiplied by the per acre yield loss and the expected harvested acres. Preliminary analysis suggests that the value of reduced agricultural production, including lost LDP, of the primary agronomic crops is $68.38 million (Table 8). About 30% of the loss is from cotton, 38% is from reduced corn production, and about 18% is from reduced tobacco production.

Table 8. Value of Reduced Production due to the 2002 Drought in South Carolina.

	Value of Reduced Production ($ Million) 1/	Value of Lost LDP 1/ ($ Million)	Total ($ Million)
Corn	$26.3	-	$26.30
Soybeans	9.58	-	9.58
Cotton	14.24	5.97	20.21
Peanuts	0.12	-	0.12
Tobacco	12.17	-	12.17
Total	$62.41	$5.97	$68.38

^1/ Production loss relative to 10-year average yield.

This is a preliminary estimate, as the harvested yield and abandoned acreage data will be updated in future USDA reports. This cost estimate does not include abandoned acreage, which will be enumerated in future USDA reports. Nor have livestock losses been accounted for in this analysis. Future analysis will include hay and forages, fruit and vegetables, and forestry. This report will be updated as more current information is received.

The drought is causing a major financial crisis for South Carolina producers. A conservative estimate of losses due to drought to South Carolina crop farmers is in excess of $0.5 billion.