FINANCIAL TIMES MONDAY JULY 18 2011

World news

Drought cripples southern US farms Obama reveals

Heatwave Grasslands have been turned to ash by wildfires and crops are failing in dry spell, reports Gregory Meyer
Half of Dahlen Hancocks cotton fields are dead. The other half are clinging on to life. The 5,800 acres he farms near Lubbock, Texas, are half irrigated and half at the mercy of the clouds. And the past nine months have been the driest in Texas on record. The Lone Star state is at the epicentre of a once in a generation drought stretching from Arizona to Florida. The USs southern underbelly is scorched like meat on a grill. The drought has spawned wildfires, turning grasslands to ash. In Texas, the leading cotton producer in the US, 59 per cent of the cotton crop is in poor condition or worse. Harvests of hard winter wheat, prized for yeasted breads, have plummeted in Kansas, Oklahoma and Texas as yields and acreage shrank. Ranchers cannot feed their cattle on parched pastures. Mr Hancock, a fourth generation farmer, says the cotton seeds he planted on his 3,000 dryland acres never germinated. All I see is dry, barren farmland. The weeds really havent even grown, he says. His irrigated crop is also right on the edge, as temperatures in Lubbock have hovered near 38C all month. Last month was the hottest June in Texas on record, topping the previous peak, set in 1953. The pain is spreading to businesses that serve the farms. West of Mr Hancock, the Meadow Farmers Co-op Gin the machine that strips cotton fibres from the seeds will hire only one 16-person crew at autumn harvest time, rather than appears clamped over much of the south. With little evaporation from dry soils, thunderstorms do not form, says Texas state climatologist John Nielsen-Gammon. Old-timers compare the situation to a big drought of the 1950s. The parallel is not encouraging, as that one lasted years. What sets this one apart is that it is extremely intense, although at this time relatively shortlived, says Mark Svoboda, climatologist at the national drought mitigation centre at the University of Nebraska-Lincoln. Although the situation in the US is helping to buoy cotton above its average cost of production, global prices have been falling. An intense rally last year spurred farmers elsewhere, notably Australia and India, to plant more cotton. Textile mills have also responded to costly cotton by weaving more polyester into fabrics. The USDA estimates the just-harvested domestic hard winter wheat crop will this year total just 791m bushels, down from 1bn last year. Wheat prices, which took off last year after a grain export ban was declared in the Black Sea, have remained supported by the dismal US outlook. The drought has led some in Texas to wish for a hurricane to attack the heat dome from the Gulf of Mexico. Arlene, the first named storm of the season, doused a sliver of southern Texas in late June. They can be a life saver, says Rosalee Coleman, a Live Oak county cattle rancher and immediate past president of the Texas Independent Cattlemens Association. Of course, we dont wish anyone harm. I always wish that it would go between Corpus Christi and Brownsville because that is ranchland. Theres not a lot of houses and a hurricane can blow across there and not do any damage then it curves up and we get all the moisture.

nominee for watchdog role

By Tom Braithwaite in Washington

The Texas cauldron

WA MT OR ND MN WY NV CA UT CO KS OK MO SD NE IA IL IN KY TN AR MS TX AK HI
Source: National Climatic Data Center
VT

ME WI MI OH WV
NH MA CT

ID

NY PA

RI

NJ DE MD DC

VA NC SC

AZ

NM

AL

GA

LA FL

D0 Abnormally dry D1 Drought-moderate D2 Drought-severe D3 Drought-extreme D4 Drought-exceptional

the two round-the-clock crews that handled last years bumper crop. I am hoping for a third of what we ginned last year, says Dan Jackson, general manager. But with each day that we dont get measurable moisture, that kind of dims. Texas grew 43 per cent of last years 18m bale cotton crop in the US, the worlds top exporter of the fibre, with the main cotton lands in the high plains encircling Lubbock. The US Department of Agriculture last week cut its forecast for this years domestic cot-

ton crop by 1m bales to 16m, as farmers abandoned a record 30 per cent of their fields. In May, the drought had already caused $1.5bn in agricultural losses, a number that is sure to rise as the drought persists, according to the Texas Agrilife Extension Service. The USDA has declared most of Texas a primary disaster area, making farmers eligible for emergency benefits. The state has more than 13m cattle, more than any other. But the size of the herd, dwindling for years,

Rainfall in June

Inches June 2011 Average June 2006-2010 Texas

1.0 2.9 1.2 5.1 2.8 4.7 3.1 3.5

Oklahoma

Kansas

Louisiana

Source: National Climatic Data Center

may shrink faster as ranchers are forced to sell calves and breeding cows they cannot feed. Theres no green, says George Enloe, a cattle broker in Amarillo, Texas. It looks like the dead of winter, except when you roll the window down its 100 degrees [38C]. The drought began about a year ago. Rain stopped falling last autumn, and has remained scarce, partly because La Nia, the Pacific weather phenomenon, steered moisture away during the winter. Now an inert dome of broiling air

President Barack Obama will nominate Richard Cordray as the first head of the new Consumer Financial Protection Bureau, the White House said on Sunday, heralding the end to a divisive year-long saga. The decision means Elizabeth Warren, a strident advocate for the new agency who energised liberal Democrats and irritated conservative Republicans, is overlooked for the job and Mr Cordray, the CFPBs head of enforcement and former Ohio attorneygeneral, will now run the gauntlet of a Senate confirmation process. Michael Barr, a former senior Treasury official who had been considered for the position before withdrawing his name, said the White House had made a good decision. I think its terrific, he told the Financial Times. Rich is smart, tough, and experienced. He was one of the first people we recruited to help run the agency. He was one of the early leaders on identifying the problems that led to the mortgage crisis and one of the top attorneysgeneral we relied on for good counsel when I was at Treasury. But not appointing Ms Warren who had begun building the agency as a temporary adviser to the president is a blow for many of Mr Obamas liberal supporters who saw her as a personable and persuasive advocate for the consumer and a persistent critic of the financial industry. Mr Cordrays chances of Senate confirmation are helped by a lower profile than Ms Warren. But by working under her at the fledgling agency, particularly in pushing for strict

penalties for banks who have broken rules in processing home foreclosures, he still faces tough scrutiny from Republicans. The CFPB took on an outsize importance during the financial reform debate that ended with the Dodd-Frank law passed a year ago next week. Dodd-Frank created the agency, charging it with enforcing consumer protection laws and transferring powers from the Federal Reserve and other agencies which were widely seen to have failed previously in the task. Many Republicans were

Richard has spent his career looking out for ordinary people in our financial system
inherently suspicious of the CFPB, seeing it as an antibusiness body that would swamp financial companies with new rules and paperwork. They saw in Ms Warren, a former Harvard law professor, the epitome of this approach and vowed not to allow her to take the job and called for the CFPB to be set up like the Securities and Exchange Commission, run by commissioners from both parties. A year ago moderate Democrats in the Senate made clear that they did not think Ms Warren could get the votes for confirmation as the CFPBs first director. But the Obama administration dithered on the decision. In a statement, Mr Obama said: Richard Cordray has spent his career advocating for middle-class families . . . and looking out for ordinary people in our financial system.