Farmers face sad sights and big decisions

The murky floodwaters sloshed against farmhouses, telephone poles, towering silos. They call the windswept fields here "the bottoms," a 50,000-acre stretch of rich, dark soil along the Mississippi River that farmers have tilled for generations.

Riding in a friend's flat-bottom fishing boat, 60-year-old Robert Kuntz and his two grown sons, Chad and Trent, surveyed the damage late last week. Their corn and soybean crops on half of the 2,500 acres they farmed were ruined when a levee burst a few days earlier.

Days before mandatory evacuation, the farmers and their wives and children moved to safe ground. They hauled away their stored grain, farming equipment and furniture. But all three families nearly lost their homes, giant storage bins, barn-sized work sheds and other property to the flooding.

"All that hard work and labor we put into it," says Robert Kuntz, his voice cracking. "I've never been through such a horrible ordeal. Who knows how many of us will come back?"

The Kuntz family and thousands of other farmers could only watch and pray as the Midwestern flooding last month destroyed 5 million acres of crops and damaged untold property. Even as the floodwaters subside, the agricultural carnage — estimated at $8 billion by the American Farm Bureau Federation — will spread into the broader economy.

Ripple effect of costs

The flood's economic impact could surpass the $12 billion (about $18 billion in today's dollars) in damages from the great Midwestern flood of 1993, which killed 50 people, destroyed thousands of homes and closed businesses for months.

"The ripple effect goes from the agricultural and food-supply chain all the way to the retail consumer, where it'll hit Joe Smith's wallet," says Jordan Rizzuto, senior economic analyst at Storm Exchange, a firm that provides weather-related risk information to businesses.

According to Storm Exchange and other economists and industry officials:

•Hundreds of barges full of grain, coal and petrochemicals for U.S. factories and export markets still aren't moving on the Mississippi, Missouri and Illinois rivers, says Lynn Muench, senior vice president at the American Waterways Operators trade group. That could cost shipping firms $50 million in losses, says Storm Exchange.

•Corporate earnings could fall for transportation firms such as Union Pacific, which says the floods will cut its earnings this quarter by 5 cents a share. Another blow to food companies: Standard & Poor's has lowered credit ratings for Tyson Foods, Pilgrim's Pride and Dean Foods.

•Prices could spike for energy, livestock feed, hogs and cattle. Strong U.S. and worldwide demand for those commodities, amid limited supplies, will ignite even more volatility.

•In supermarkets, the cost of milk, eggs, butter, flour and other items already are rising at double-digit rates, and food producers likely will pass on their higher costs to consumers in the coming months.

The full impact in the disaster zone won't be known for six to 12 months, after federal aid fully kicks in and insurers decide how much crop and property damage to cover, says senior economist Rick Mattoon at the Federal Reserve Bank in Chicago.

Based on the 1993 flood and other disasters, Mattoon expects the small business and tourism sectors to suffer, with farming, construction and manufacturing bouncing back quickly in a mini-economic boom.

Agriculture remains the worst-hit sector. Craig Lang, president of the Iowa Farm Bureau Federation and a dairy farmer, estimates that one-third of Iowa's 90,000 farmers suffered losses large and small to crops, hogs, cattle and property.

"This 500-year flood moved across almost the entire eastern part of the state," Lang says. "It's going to take a long time to rebuild farms and communities."

Even before the flooding, crops were hurting from a cold, wet spring and probably would have fallen short of annual average yields per acre, says Roger Elmore, an agronomist at Iowa State University Extension.

The U.S. Department of Agriculture reports that farmers this year expect to harvest 79 million acres of corn — a 9% drop from 2007. Soybean crops suffered less damage, with growers hoping to harvest 72 million acres, or 15% more than 2007.

Farming's in their blood

Robert, Chad and Trent Kuntz typify the tough farming stock hit by the flooding. Since their ancestors emigrated from Germany and Switzerland to Iowa a century ago, the family has farmed beside the Mississippi River for four generations.

The growing global demand for food has helped many farmers enjoy record profits in recent years. But their "input costs" also have been soaring, including higher prices for seeds, diesel fuel and fertilizer. Property values for farmland in Iowa have skyrocketed from $2,000 an acre to $7,000 to $8,000 an acre for the most prized fields.

Trent Kuntz, 26, says they lessen their risk by growing different crops. If one doesn't grow well, another will. After selling their crops, they plow the money right back into the farm.

"It takes a lot of faith to be a farmer," Chad Kuntz says. "We never know what the Lord has planned. Climatologists had predicted a drought year this year. Well, look what happened."

With putrid floodwater still swamping their fields and homes, it's too early to estimate losses. Insurance may cover 75% of the dollar damages to their crops, and they hope to sell their unflooded crops to cover bills.

After natural drainage and big levee pumps remove the water, the sun should dry the soil in several weeks. It's unclear when the Kuntz family will move back to repair and rebuild their farms.

Chad and Trent Kuntz both have grade-school kids and toddlers, including a little girl who keeps asking why they can't go home. Her wooden swingset lies smashed against a levee.

"We'll get through this — it's just a bump in the road," says Robert Kuntz, who is near retirement. "We're already planning for next year."