USDA mulls all options on Midwest flood aid

By Charles Abbott

WASHINGTON, June 18 (Reuters) - The U.S. Agriculture Department will look "at everything possible" to aid Midwest farmers hurt by the worst flooding in more than 15 years, Agriculture Secretary Ed Schafer said on Wednesday.

President George W. Bush was scheduled to visit Iowa on Thursday to see damage first-hand. Schafer was to accompany him.

Agricultural losses in Iowa may be "in the range of $2.7 billion," said two Ball State University economists in a preliminary estimate based on comparisons with the 1993 Mississippi River flood. Damage to roads, homes, commercial buildings, power lines and water and sewer systems may be $160 million.

During a visit to Capitol Hill, Schafer said USDA was assessing the crop and livestock situation in Iowa, where 3-6 inches of rain fell in central and eastern counties last week. Nine percent of Iowa's corn land and 8 percent of its soybeans were flooded at the start of this week.

"We're going to be looking at everything possible to help," Schafer told Reuters. He said it was too early to elaborate.

Senators from Iowa, Missouri, Illinois, Wisconsin, Indiana and Ohio -- all hit by damaging spring storms -- agreed on Tuesday to work together to maximize aid. In Illinois, corn was a foot tall on average this week, half its usual height and an indication of how a cold, wet spring is slowing crop development.

During a teleconference on Tuesday, Sen. Charles Grassley, Iowa Republican, said producers might benefit from the $3.8 billion disaster fund that is part of the 2008 farm law. Farmers must have crop insurance to qualify for the program.

Payments would be based on average crop prices for this year's crops. That would mean a payout in October 2009, said Schafer.

Grassley also suggested USDA could allow penalty-free haying and grazing on land idled in the long-term Conservation Reserve.

Ball State economists Michael Hicks and Mark Burton said Iowa's circumstances were similar to the 1993 flood, which lasted through much of June.

"Employing the same level of crop damages for 1993 and adjusting it by USDA's May farm-price index, we would expect crop damages in the range of $2.7 billion for Iowa alone," they said.

Grassley told reporters that during a flight over Iowa last weekend, "I saw hardly a field that didn't have ponding."

"A lot of fields had lakes. There's hardly a speck of dry land," said Grassley. "It's going to be tough to recover."

Some livestock and grain processor groups have argued for years for early release of land from the Conservation Reserve with no requirement to return rental payments to USDA. Contracts on 2.3 million acres of the 34.7 million acres in the reserve expire on Sept. 30. (Reporting by Charles Abbott, editing by Matthew Lewis)