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Analysts: Reports Of The Death Of The Midwest Are Premature

July 1, 1988

DES MOINES, Iowa (AP) _ Despite gloomy reports of drought damage to the nation’s breadbasket, the Midwest is far from a basket case and the final impact of the dry spell remains unclear, experts say.

″People are ready to write the whole Midwest off,″ said Jerald Barnard, director of the University of Iowa’s Institute of Economic Research. ″I think there’s a reason to have some moderation in this.

″We’re not likely to see a disaster, on one side, and we’re also not likely to see the crops come through unscathed,″ he said in a telephone interview Thursday from his Iowa City office.

At Iowa State University in Ames, researchers at the Center for Agricultural and Rural Development said that because of the great variation in the drought’s impact it could be disastrous for some farmers and beneficial to others. It recommended any government relief programs target assistance to just those farmers hurt by the drought.

″Crop farmers who lose all or almost all of their crops will suffer obvious losses,″ said William Meyers, the center’s associate director. ″Livestock producers are caught in a tight squeeze - higher feed and forage prices cause early marketings that are reducing current livestock prices.

″However, farmers whose crops are less affected by the drought will gain significantly from higher crop prices, as will those who have grain in storage,″ said Meyers.

Meanwhile, a Federal Reserve Bank analyst in Chicago backed away from an earlier warning that the drought could cut short a recovery by farm banks.

″Farmers look like they have some staying power. Farm bankers, too,″ said George Gregorash, banking analysis officer of the Fed of Chicago, who surveyed agricultural banks in Iowa, Wisconsin, northern Illinois and northern Indiana.

Just two weeks earlier, in preparing an annual review of Midwest farm banks, Gregorash made a more dismal assessment, saying the drought ″could make the 1987 gains short-lived.″

But after surveying bankers this week, Gregorash said, ″The news is fairly good.″

All of the analysts say the drought’s final impact remains unknown and point to the huge fluctuations in commodity markets each time rain falls in the Farm Belt or is even forecast as signs of the uncertainty.

″Changing weather is likely to result in wide swings in prices between now and harvest,″ said Stanley Johnson, director of the center at ISU.

ISU said the best that can be hoped for, through a shift to ideal conditions for the rest of the growing season, is average national corn yields dropping 15.6 percent to 100 bushels an acre, soybeans dropping 9.1 percent to 30 bushels an acre and wheat dropping 6 percent to 36 bushels an acre.

Average normal yields are 118 1/2 bushels an acre of corn, 33 of soybeans and 38.3 of wheat, said research associate Patrick Westhoff.

The most severe forecast, comparable to a drought like that of Dust Bowl days, would reduce corn yields by 40 percent, soybeans by 27 percent and wheat by about 15 percent.

A moderate scenario, based on a slight intensifying of current drought conditions, would fall midway between the best and worst outlook and would reflect conditions as severe as any drought of the past 25 years, Westhoff said.

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