July 17th, 2012
01:02 PM ET

How the drought could hit your wallet

With more than half the country in some state of drought, farmers are feeling the impact on their livelihood and consumers could expect to feel a hit in their wallet when they go to the supermarket soon, experts say.

The U.S. is facing the largest drought since the 1950s, the National Climatic Data Center reported Monday, saying that about 55% of the country was in at least moderate short-term drought in June for the first time since December 1956, when 58% of the country was in a moderate to extreme drought.

The hot, dry weather in June, which ranked as the third-driest month nationally in at least 118 years, according to the center, made the problem worse.

That has left farmers on the edge of their seat worrying about how much damage their harvests will sustain and how much of their livelihood they may stand to lose this year.

Throughout the Midwest, farmers are seeing signs of damaged crops. In the 18 states that produce most of our corn, only 31% of the crops were rated good or excellent this week, that’s down from 40% last week, according to the U.S. Department of Agriculture. This same time last year, 66% of corn crops were rated good or excellent. Soybean crops, which can be used in creating diesel fuel, are seeing similar troubles; 34% of the U.S. crop was rated good or excellent, down from 40% last week. This time last year, 64% were in that condition.

Derek Mullin, a farmer from Mount Pleasant, Iowa, told CNN’s Chris Welch that in a good year he can get 200 bushels of corn per acre, but this year he expects that number reduced by 25%.

That lost money will hurt him and his family and he said there is nothing he can do about it.

Is the drought hitting your area? Let us know how you're coping on CNN iReport.

"This is our personal business. It's right at our back door. As soon as we walk out of our house we see our investment and when it goes downhill it does take a toll on you,” he told CNN.  “One of the hardest parts about this is you can do everything just right - planting dates, work hard at putting in a good crop, have a good stand established - and when mother nature works against you, then it all seems like it was for nothing."

Mullin's expected low yield of corn, and similar situations for other farmers, is specifically why this drought is getting a lot of attention, Richard Volpe, an economist with the USDA's Economic Research Service told CNN.

"Corn is a major input for retail food," he said. "Corn is used to make feed for all the animals in our food supply chain. As this drought reduces the harvest of corn, that would drive up the price of feed for animals and then in turn meat products."

The current drought has forced disaster declarations in 26 states and a spate of emergency conservation orders. And experts say it could also lead to serious economic repercussions the same way the National Oceanic and Atmospheric Administration says it did during the 1956 drought,  which dropped crop yields about 50% in some areas.

Agriculture Secretary Tom Vilsack told CNN's Candy Crowley his heart goes out to the producers, ranchers and farmers who are dealing with something they have no control over.

"We’re really not going to know the full extent of all of this until the cotton’s picked, the beans and kernels are counted. But clearly our yields are going to be down.”

And if the crops aren’t there, you can expect to see some differences in the supermarket, Volpe said.

"You would see it first and heaviest for beef, pork, poultry and dairy," Volpe said, explaining that if you can't get the corn to feed animals, the meat market would be hit first and could have the longest-term impact.

Field corn, which is the dominant type of corn affected, is used to create feed for animals, but also corn meal, corn syrup and ethanol. Those products could also take a hit.

But Volpe wants to be clear that there isn't a one-to-one ration when it comes to the price of corn versus what you'll be paying for your meat.

"We understand historically, if the price of field corn goes up by 50%, which is a huge jump, we expect retail food in general to go up by about 1%," he said.

So you likely won't see the doubling of the price of a rib-eye steak, but over time, prices could accumulate.

And when might you expect to see this happen?

"For sure, the full effect of this drought will not be until 2013. It'll be 2013 when we see it and its in the whole supermarket," he said. "But if the price of corn shoots up, we’d see this effect within about two to three months. That doesn’t mean we’ll see a complete jump into food prices. It's just that we should start to see the effects."

Only July 25 the USDA will provide their monthly estimates of food prices, which would factor in drought conditions, Volpe said.

Volpe noted that you could also actually see some short-term lower prices on meat, noting that historically there is a small dip in the price of beef and pork before they start rising.

Ranchers "have these animals on hand, and animals that are market ready," he said. "What they do is figure out, OK well the cost of maintaining this herd in the next few months is going to shoot up because of the rising price of feed, if it make sense to do it now, get the guaranteed money."

Volpe notes that while there are many comparisons being made to the drought in the 1980s and the economic impact it had, it is important to keep in mind how much has changed since then and why that may mean you can't draw an exact correlation to how hard the economy could be hit by this drought. That's something that the agriculture secretary noted too, saying that technology had changed and conditions were different.

"The 1980s were a much different time, average food prices in the '80s were much higher than in recent years," Volpe said. "Fuel prices were much more volatile and the global economy and market for commodities were not as efficient."

While Mullin waits to see just how bad things will get he says that his saving grace, like other farmers, could be having federal crop insurance. But, he added, that only goes so far.

That’s one reason why Mullin, and others in his state, are anxiously waiting to see how state and federal authorities may be able to help.

Mullin said he is hopeful he may hear some answers from a drought conference being led by Iowa’s governor on Tuesday.

Vilsack said the biggest problem is that while the USDA has emergency loans and some other options to help, it lacks the full resources the government needs.

"The real challenge for us is the USDA does not have the tools it once had to help people through this difficult time," Vilsack told CNN.

Vilsack used the drought as an example to plead with the Senate to pass a farm bill that has already cleared the U.S. House of Representative, adding it was not enough to extend a previous bill that expired.  He noted that the 2008 farm bill which expired had provided $4 billion in disaster assistance to 400,000 farmers and ranchers while it existed.

“Just extending the 2008 bill will not revive disaster programs for livestock producers” he said.

– CNN's Chris Welch contributed to this report.

More on the intense heat, drought:

Extreme weather: Get ready to see more of it

Past 12 months warmest ever recorded in U.S.

KCTV: Intense heat take its toll on Shatto's milk supply

WLUK: Christmas tree farmers battle hot, dry conditions

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Filed under: Agriculture • Heat • Weather
soundoff (452 Responses)
  1. fernace

    The 1 "crop" we're running out of slowly but surely is.....fresh drinking water! Think about that for a sec!!

    July 17, 2012 at 9:34 pm | Report abuse |
  2. ryan c

    We make so many crops, the government usually pays some farmers to destroy thier crops. Isn't this why? To keep hedging prices to stave off a drought from reducing supply. We can just use the crops wed normally trash

    July 17, 2012 at 9:53 pm | Report abuse |
  3. Jerry

    In the past three years my grocery bill has gone up 30%, gas has gone up 40%, my health insurance up 20%, rent is up 10% and my income has gone down. I had to sell a car, cancel my cable service and stop eating out at restaurants. I'm glad I still have a business to work at....for now.

    July 17, 2012 at 10:26 pm | Report abuse |
  4. justinstl

    This is when the government needs to step in and put caps on the food industry and force all companies that deal at all with the agricultural field to only be allowed to make 5% profit NO MORE. Cap it! To pass the losses onto the consumer will make a life and death consequences on a lot of people. Now they are going to make it so that you have to be wealthy to eat at all. Thats capitalism at its best for you! Do you know how many people willl be on food stamps now? I bet it will double. Very SAD Do you think it ok to let people starve so you can continue to profit???? What is wrong with you people? Is money everything to you ? The government does have the power to freeze prices....and seize companies who do not comply.

    July 17, 2012 at 10:59 pm | Report abuse |
  5. AZ

    Time to make God happy.......

    July 17, 2012 at 11:03 pm | Report abuse |
  6. justinstl

    This is one of those cases where that Romney guy would say...Too bad too sad for the poor people..... If you learn to be a cheating businessman only concerned with profit you will be just fine.

    July 17, 2012 at 11:06 pm | Report abuse |
  7. katief

    Maybe we shouldn't have corn in 75% of everything we use – processed food, animal feed, fuel, packaging, make-up, etc. – corn cultivation is water and land intensive – we take Mother Nature for granted, and She is fighting back.

    July 17, 2012 at 11:28 pm | Report abuse |
  8. Rascal Rabble

    obamacare gonna hit the wallets

    July 17, 2012 at 11:41 pm | Report abuse |
  9. Anna

    Everything has hit my wallet since this moron took office.. Am I better off than I was 4 years ago – absolutely not!

    July 17, 2012 at 11:46 pm | Report abuse |
    • Ken

      obama stopped the rain?

      July 18, 2012 at 2:02 am | Report abuse |
  10. Chuck

    Heaven forbid the blue states try and feed from the FEMA trough once in a while. Red states consider the fund their own personal "money bucket", grabbing for the pail with one hand while badmouthing "big government" with the other.

    July 18, 2012 at 12:48 am | Report abuse |
  11. thesitrep

    This is why it is so important that we burn 10% corn ethanol in our cars.
    /s

    July 18, 2012 at 1:31 am | Report abuse |
  12. Roland

    Drought....our world is full of it, i am tired of hearing about it and many bickering how to prevent it, I tell you what, lets focus on less destruction on our natural resources which God has given us on earth to survive with, lets not think about diamonds,gold silver,metals and anything that has value to it and stop taking it,stop using our waters for destruction purposes, lets just let earth flow naturally and use reuseable products like glass and plastics a s amoney source. tearing up the lands in the name of Money and development will only create a secure drought problem, its time we either use the corporate biz to recycle trash or we recycle them...They dont care about the loss of precious jungles or waters, they want money only and its them today creating all this drought. Save our Earth Now!

    July 18, 2012 at 3:32 am | Report abuse |
  13. C

    Hogwash. Most of our produce already comes from other Countries.

    July 18, 2012 at 5:31 am | Report abuse |
    • luvthe USA

      We supply most of the world! Why don't we stop selling to this country and maybe then people would appreciate farmers!

      July 18, 2012 at 7:31 am | Report abuse |
    • Barry Osama

      "Worst president since the 20's will cost us all – VOTE Soetoro OUT IN NOVEMBER!!!

      July 18, 2012 at 7:32 am | Report abuse |
  14. silvereagle

    I stocked up a long time ago with corn.I have enough for 3 years.Now the price of gas is going to go up because of the ethanol that is mixed in it.Anything made with corn is going up.Stock up on grits while you can.Can't wait for the winter wheat crop.That too will also fail.

    July 18, 2012 at 6:10 am | Report abuse |
    • ME

      Two questions
      1. What did you stock?
      2. How did you store it?
      Thanks

      July 18, 2012 at 7:20 am | Report abuse |
  15. shaun catron

    lol at all you sheep arguing about "the left" and 'the right". How about we all meet in the middle and stop being idiots?

    July 18, 2012 at 6:20 am | Report abuse |
    • Barry Osama

      Who is Barry Soetoro?

      July 18, 2012 at 7:33 am | Report abuse |
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