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. saywhat

    15 trillion of debt and counting.Worst drought in 25 years with no relief in sight. Almost 60 million children in this good ol' US of A going hungry every day, a dwindling middle class, millions living below poverty line and counting.
    economists forecast that even if things take an upward turn problems would continue far into the future.
    Who cares, lets start another war in the M.East , find ways to get our military into Syria and continue circling the globe with our bases.
    It doesn't matter if we have to do that by borrowing more. We can afford that can't we??

    July 17, 2012 at 1:59 pm | Report abuse | Reply
  2. rosie

    The cost of many things will go up. Remember that we have ethanol in our gas tanks and it comes predominately from corn. I guess gas prices will be going up soon too. Wow not even an oil speculator in site!!

    On another note: in NC I have noticed around where I live that farmers have been planting a late crop of corn in some of the fallow fields. Seems that our drought has not been so harsh and the farmers see profits in late corn crops. Those tricky farmers.

    July 17, 2012 at 2:00 pm | Report abuse | Reply
    • Peter

      the entire southeast is the garden spot of the country right now. The EPA should reduce the ethanol mandate by 5% and corn price would drop 30% in a week. But they wont and it is going to hurt a lot of industries and people.

      July 17, 2012 at 2:07 pm | Report abuse |
    • Majestic

      The prices WILL go up because of the drought. What would you bet the the prices will come DOWN after the drought? LOL! NFW!

      July 17, 2012 at 2:21 pm | Report abuse |
    • susansbaker

      Gov't should stop subsidize the farmers grow corns for ethanol, which contribute more harmful to the economy and environment. The oil companies are have lucrative profits, they don't need our tax dollars. Now, our corrupted politicians want to put the gas tax to the consumers again,

      July 17, 2012 at 2:21 pm | Report abuse |
    • Ann Brush

      Rosie, you may have forgotton, but they have not: They already planted (and paid for) one crop earlier in the season – and got zip from it. By planting a second (or third) they are looking to recover from catastrophic losses, not make stellar profits.

      July 18, 2012 at 4:09 pm | Report abuse |
  3. DJBMM

    But I thought we had the all mighty HAARP to create and control weather??? =0(

    July 17, 2012 at 2:01 pm | Report abuse | Reply
    • Don

      Weather Modification Inc is all over the USA and Canada and can create rain thats why I think you all are getting SCREWED. Google it . Phone or contact your local stations and ask them to interview

      July 17, 2012 at 2:13 pm | Report abuse |
    • Don

      HAARP is the Electromagnetic frequency that is used to manipulate the aluminum particles in the clouds and sky to modify the weather . The aluminum particles is the Haze in your skys after several Jets fly over in a grid pattern. Over in DUBAI , and its on the internet they have created since 2010 50 rainstorms with out a cloud in the sky ,and explains it very simply (you Tube). They also use Electromagnetic waves to IONIZE the AIR. Do Your Homework People ITS A REALITY.......

      July 17, 2012 at 2:19 pm | Report abuse |
  4. NN

    Looks like the government needs to plan on spending $200B annually just on weather related disaster relief. This is so wonderful.

    July 17, 2012 at 2:02 pm | Report abuse | Reply
    • conoclast

      IIf you can't stand the heat, get out of the kitchen. If you can't stand the Climate Crisis (or even believe it exists) get off the planet; you're now officially IN THE WAY.

      July 17, 2012 at 2:07 pm | Report abuse |
  5. conoclast

    Tea-party affiliated farmers will automatically reject government crop-insurance payments as just more evidence of creeping socialism, won't they? SURE they will! What's idealism worth when your family's rice-bowl is on the line, eh 'baggers?

    July 17, 2012 at 2:02 pm | Report abuse | Reply
    • Charlie

      That would only be true if they were not also supporting those programs.

      July 17, 2012 at 2:04 pm | Report abuse |
    • BBoy

      Right on man!

      July 17, 2012 at 2:33 pm | Report abuse |
  6. c s

    Remember that global warming has nothing to do with this drought, so saith the GOP and Fox news. All of those good Republican farmers blame "nature" but not God. Of course the Federal government will need to help these Republican farmers because they need it unlike those worthless union autoworkers and union postal workers and anyone else who have a union. Letting ordinary people have a contract like a CEO is totally wrong. The CEO need to have a contract or else they will move to China and make them rich instead.

    Sarcasm.

    July 17, 2012 at 2:03 pm | Report abuse | Reply
    • Pappa Smurf

      We don't need cars (auto unions) and mail (postal union) to survive. We do however need farmers to grow food to survive. Since you seem to have so little respect for uneducated, hillbilly farmers, why don't you start growing your own food.

      July 17, 2012 at 2:18 pm | Report abuse |
  7. Gary

    So I wonder if Eisenhower in 1956 blamed Truman for that drought?

    July 17, 2012 at 2:03 pm | Report abuse | Reply
  8. RandyMarshCT

    The drought will hit our wallets... but it will be nothing compared to the inflation we'll see over the next year. "Yeah, these high prices are from the drought..... global warming...... no, it has nothing to do with bank bailouts or the Federal Reserve printing money out of thin air." Another good scapegoat.

    July 17, 2012 at 2:04 pm | Report abuse | Reply
  9. Peter

    The EPA could fix the problem by reducing the ethanol mandate from 10% to 5%, but instead they will do nothing. The increase in food is a tax and will certainly hurt our economy and the world economy. The poor are going to suffer all over the world.

    July 17, 2012 at 2:05 pm | Report abuse | Reply
    • bobjective2

      Ethanol has nothing to do with food prices as the by products from ethanol can still be used to create food, of any type that the con would have been able to use prior to making ethanol. Infact, the production of ethanol reduces your largest portion of your food bill, the transportation cost.

      July 17, 2012 at 2:23 pm | Report abuse |
  10. whitetrash

    This is the end of times this signs are .what is coming is even worse . Repent urself

    July 17, 2012 at 2:05 pm | Report abuse | Reply
    • Smarter Than You

      That is the dumbest thing I have ever heard.

      July 17, 2012 at 2:15 pm | Report abuse |
  11. Daddy Rabbit

    I know these guys well. Mostly right-wing types who want the government to stay out of their business. UNTIL, they need a bail out with our money or technical assistance from the Department of Agriculture. Get ready for farmers wnating the government back in their lives.

    Way back in.

    July 17, 2012 at 2:08 pm | Report abuse | Reply
    • JC

      What are you talking about? The FARMERS vote Democrat.

      July 17, 2012 at 2:11 pm | Report abuse |
  12. www.twitter.com/hlmelsaid

    Effective results for all prices from food to gas.

    July 17, 2012 at 2:10 pm | Report abuse | Reply
  13. JC

    So the even BIGGER question...

    Will Obama blame the drought as the reason why the economy has not rebounded... or will be blame George W Bush?

    July 17, 2012 at 2:10 pm | Report abuse | Reply
  14. UnSub

    The cost will probably go up and never ever go back down because hey the middle class will pay it!

    July 17, 2012 at 2:13 pm | Report abuse | Reply
  15. Charlie

    So there was a worse in the 1930's this is nothing unusual.

    July 17, 2012 at 2:13 pm | Report abuse | Reply
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