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. Jen

    What we need to get out of this drought is the fact that we need to stop being to dependent on a single crop. Yes all other crops are going to be affected. But by being so dependent on a single crop this will hurt us more than if our dependencies were spread out on multiple crops, that way there would be a chance that some crops were more drought resistant than others and we wouldnt loose as much.

    July 18, 2012 at 2:40 pm | Report abuse |
    • Citizen Rights

      Jen, you obviously do not know anything about farming. Did you ever hear of crop rotation?? In Illinois we plant corn then
      followed by soy beans the next year. Corn depletes the soil, so the next year field is either left fallow (empty) or planted with soy beans that will replenishes the soil. Read up on farming before you make a uninformed response. Illinois is soy bean King, but we plant corn, alfalfa, wheat and various other grain crops, as well as, raise swine, cattle and sheep.

      July 18, 2012 at 3:56 pm | Report abuse |
    • Semantics101

      If only we learned that water travels with gravity and that is lateral and down, with the expetion of sublimination.
      The point is, during winter frost the valley become flooded because rivers cofluence into larger rivers. By maintaing control of high elevation rivers with sluice ways, the high water marks can be diverted into reservars. Thus giving the Bread Basket of America the ability to irrigate during the summer and keep water levels down in the lower valleys during the rains/melts.

      July 18, 2012 at 7:42 pm | Report abuse |
  2. carol

    shrugging... we had a taste of this in the southcentral plains last year – a big taste. How quickly we forget the lessons we should have learned. A huge, and grossly overlooked, factor in this is hay or more accurately the lack of it. You don't put milk in a cow with corn – it takes alfalfa and other legumes. Beef cattle are only 'finished' on corn – most of their diet is grass/hay. And with hay so scarce and expensive last year, many producers shipped their breeding stock because they couldn't feed them.
    But heck – let the folks starve. Can't have the feds dishing out any money that would hit the deficit, can we? Let's see – the bottom line is if enough people starve, it will mean fewer people left out of work, fewer teachers needed to teach kids that didn't make it... That's a win-win for the Tea-partiers, isn't it?

    July 18, 2012 at 3:07 pm | Report abuse |
  3. Derp

    The farmers with the irrigation systems got the right idea. Installation and the water cost money, but you get the end product (corn/food). If our tax money is going to go into something, its better for it to be infrastructure that will last like that rather than just gambling on the weather.

    July 18, 2012 at 3:41 pm | Report abuse |
    • Joe P.

      Until the water runs out

      July 18, 2012 at 3:56 pm | Report abuse |
    • Ann Brush

      Derp, adding a multi million dollar investment to a crop field that needs it one year in 20 is never going to make sense. That's one BIG reason we row crop in the Midwest – we can usually rely on RAIN!

      July 18, 2012 at 4:03 pm | Report abuse |
    • bob110h

      On full output a center pivot irragation system can put about 3/4" of water on a field a day. When its this hot and dry corn (and all other crops for that matter) require about 1-1.5" of water a day to survive. Quite simply the wells and pumps can't keep up.

      July 18, 2012 at 4:55 pm | Report abuse |
    • Semantics101

      That's what I've been innovating in my head for decades.
      The U.S. geography has a key featcher; mountains and valleys. Rivers work their way down from high elevations and merge into larger rivers until the water reaches navigatable rivers.
      Flood control at higher elevations is the proper way to maintain safe water levels in the valleys. By building spill ways every few hundred miles or so, water can be diverted to resevoirs during the flood stage. Then during droughts the resvoirs can be irrigated to argriculture.

      July 18, 2012 at 8:05 pm | Report abuse |
  4. buck

    For everyone one out there that thinks this effects food prices it really shouldn't if corn goes up from $5 to $8 it cost 1 cent more to produce a can of pop. A box of cereal should only cost a couple cents more to make. Plus we have so much carryout of corn the price of things at the store made of corn really shouldn't go up much but they will. In the long run beef will because farmers won't be able to afford the feed and they will flood the market which in turn will make beef cheaper in the near term but in the longer term there will be less cattle so the price may go up until cattle numbers are back up. Also for all the organic people if all the crops were organic we probaly wouldn't have any carryout cause the yield of organic crops such as corn and soybean is 50% less, organic crops also won't grow as good on half the land in production therefore food prices would be way higher and the hybrids now adays can help in these drought situations.

    July 18, 2012 at 4:04 pm | Report abuse |
  5. Nathan

    Why should it hit our wallet? It is government's job to take care of us. oh wait, they're too lazy and earning a lot of $$$ than we do!

    July 18, 2012 at 4:06 pm | Report abuse |
  6. Holly

    Looks like America will be put on that much needed diet.

    July 18, 2012 at 4:19 pm | Report abuse |
  7. salomonr8

    I feel bad for the farmers and those of us who are struggling financially. But, why don't we do what the oil companies and other countries do. Pass the higher cost onto exporting to China. If it were not for the U.S. exporting food to China, I do not believe China would be able to survive. They are not able to grow enough food to be self sufficient. China has a reputation for making products, from furniture, clothing and electronics cheap. Most of the products coming out of China are not only cheap but are of poor quality. We should demand better products being imported from China and if they do not comply, then give them poor quality products as well, such as second grade food and third quality cotton. We are the U.S. and should only expect the best when purchasing items made here in the U.S. or imported.

    July 18, 2012 at 4:30 pm | Report abuse |
    • Thermion7

      Agricultural exports are typically $140 billion business for the US... with reduced yield, it will be hard to make back alot of the money farmers have invested into the production of their crops. The cost of planting, watering, transport, pesticides, herbicides tilling , equipment, harvesting etc. are the same whether there is rain or not... the only difference is the amount you can harvest and sell... for many farmers, it may be the third year in a row that they are actually losing money by being farmers... actually paying for another year of farming.

      July 18, 2012 at 8:55 pm | Report abuse |
  8. Godzilla

    Just another reason for us to pay the price gouging & greedy Government!! Thats the democrats for ya, always finding ways & excuses to make us pay more money!!!

    July 18, 2012 at 4:45 pm | Report abuse |
  9. KennyZ2

    Oddly, the caption says dought will raise food prices, but the Secreatry says 'not so', 'maybe next year', and 'increased energy costa impacts prices more'. Get it togeher, CNN!

    July 18, 2012 at 7:06 pm | Report abuse |
  10. mel c

    If the government subsidized farmers to diversify their crops and actually grow food instead of these monoculture commodities, the drought would have less of a disastrous effect on everyone. Monoculture is much harsher on the land and in turn less resistant to pests, disease, and drought.

    July 18, 2012 at 7:32 pm | Report abuse |
  11. JQ

    Let animals graze to alleviate animal feed stock it produces healthier animals, and tastier food. Also domesticated animals are quite capable of consuming a variety of food sources. In the mean time we have to wait it out, rely on irrigation and good job Monsanto for producing "miracle" seeds, real effective.

    July 18, 2012 at 8:03 pm | Report abuse |
  12. bvilleyellowdog

    Global warming. It will get far worse. Thank Exxon and the regressive teapublicans.

    July 18, 2012 at 8:19 pm | Report abuse |
  13. whatsdown

    This drought wouldn't be a problem if we didn't consume up to 40% of our corn crop each year making ethanol fuel. Using this corn only replaces about 3% of the gas we use. Since oil is used to grow the corn, it's hard to say if there is any benefit. Ethanol is subsidized with tax dollars and drives up food cost. Traditional government farm programs such as the Loan Guarantee program, subsidized grain storage. This kept farmers in business during bountiful years when the grain prices were low and leveled off spiking consumer prices during lean years. Traditional farm programs gave taxpayers a return on their investments. What we are doing now is just stupid.

    July 19, 2012 at 1:02 am | Report abuse |
    • t keller

      Sounds like a no-brainer. Cut back on the ethanol production to balance food supplies.

      July 19, 2012 at 12:41 pm | Report abuse |
  14. Grumpyfin

    I was thinking that this drought would basically balance things since EVERY year, the U.S. has a surplus of food and in fact so much of a surplus that what we throw away on a daily basis contributes to the carbon footprint due to the massive amounts of decomposing food in landfills everywhere.

    July 19, 2012 at 5:23 am | Report abuse |
    • waterford

      Lets see. We have two choices, either try to produce just enough but when it is not enough starve or go hungry or the other choice is produce enough but throw some spoiled food. Or do you prefer option 3 which is eat the spoiled food.

      July 19, 2012 at 12:34 pm | Report abuse |
  15. RobM

    I'm in Illinois right now and just bought twelve ears of sweet corn for $4.... maybe up 20 cents per ear from last year. Doesn't seem to warrant all the panic about global warming and 'water disappearing' its not gone its some where else. Chances are precipitation levels will return to normal sooner then later. It's not like Illinois has never experienced a drought before.

    July 19, 2012 at 4:58 pm | Report abuse |
    • RobM

      I meant 20 cents per dozen.

      July 19, 2012 at 4:59 pm | Report abuse |
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