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

Post by:
Filed under: Agriculture • Heat • Weather
soundoff (452 Responses)
  1. Holly

    What is it with you people? This is a story about a drought and the rising costs related to it. Yet as usual, you use it to spout your political drivel. Republicans blaming Democrats, Democrats blaming Republicans. You even bring wars into it. Give it a rest, would you?

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

      Holly thank you!! the fact remains the EPA could fix the problem and I hope they do by reducing the ethanol mandate from 10 to 5%,

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

    Corn and beans are pretty stupid crops for me to subsidize, period.

    July 17, 2012 at 2:15 pm | Report abuse |
    • Jack Sinclair

      Corn is also a stupid crop to make fuel from as it is break even at best as far as using as much energy as it produces. Unfortunetly our President is from a corn state so is pushing its use. Though both parties are to blame for promoting inane monocultures of only two crops. With the FDA now trying to push small producers out of business we could be in real trouble down the road.

      July 17, 2012 at 2:36 pm | Report abuse |
  3. Barbie

    Tobacco is another crop that shouldn't be subsidized–should we pay for it and then foot the bills for medicare when smokers start to get sick?

    July 17, 2012 at 2:16 pm | Report abuse |
    • Norm

      Well if they're going to rake in taxes from it, they better subsidize it.
      They make almost 25 billion a year allowing us to smoke.

      July 17, 2012 at 2:24 pm | Report abuse |
    • O'Reilly

      @Norm. Nowhere near the cost of healthcare for the emphysema, cancer, etc.

      July 17, 2012 at 2:32 pm | Report abuse |
    • TomGI

      In my neighborhood BNSF trains go by all day. The old retired train guys say all the cars going east are carrying toys and cheap junk coming from China and headed for Walmart. And all the cars headed west are carrying highly coveted American made cigarettes destined for China. It's our secret weapon to kill them off.

      July 17, 2012 at 2:35 pm | Report abuse |
    • Norm

      So it's government sponsored suicide.

      July 17, 2012 at 2:36 pm | Report abuse |
  4. Bill

    Of course the drought will hurt your wallet, All the big corporations will be Jacking up prices using the drought as an excuse. Expect no less.

    July 17, 2012 at 2:16 pm | Report abuse |
    • Norm

      Not the companies...it's wall street that will jack up the prices whether there's a shortage or not.
      Just like they do with the gas prices every time someone launches a shoe in the Middle east.

      July 17, 2012 at 2:26 pm | Report abuse |
  5. Andy Hangley

    Why is it that when a natural disaster hits the crops, food priced go up, and in the following years when the crops are great, the prices never come back down? Seems like the middleman loves times like this.

    July 17, 2012 at 2:18 pm | Report abuse |
  6. DK

    According to mittens – it's all Obama's fault

    July 17, 2012 at 2:18 pm | Report abuse |
    • andrew

      and according to Barry it's all Bush's fault. lol

      July 17, 2012 at 2:27 pm | Report abuse |
    • Norm

      And according to Bush it's all Clinton's fault.

      July 17, 2012 at 2:36 pm | Report abuse |
  7. Obama Mama

    I would like to say a great plant would be the Moringa Tree, grows best in dry sandy soil and is drought resistant. How fast you can change your diet and crops. Adaptation and innovation in crops could keep us in food instead of becoming a dust bowl. Look up wikipedia and this life giving and versital tree. Truely a wonder of a tree of vitamins.

    July 17, 2012 at 2:20 pm | Report abuse |
    • Ann Brush

      Of course the tree would do great in the non-sandy, non-dry soil of the Midwest.

      July 18, 2012 at 4:15 pm | Report abuse |
  8. bobjective2

    If you take the government out of the picture for agricuture, food prices would really rise because the only way any farmer would take the risk, and be totally exposed would be to have more reward or otherwise known as higher crop prices. So while some of you look at it as subsidizing the farmer it really should be looked at as subsidizing the general populations food bill. If the farmers that would have went completely belly up without the government's help would have been forced out of the business as you some are advocating the number of acres planted would be greatly reduced and the cost of food would be significantly higher.

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

      I call it farmer welfare.

      July 18, 2012 at 6:34 am | Report abuse |
    • Joe P.

      I have nothing against government sponsored crop insurance for farmers, in fact, I think it's a good idea. Some of the other farm subsidies are questionable, though. What really ticks me off is the hypocrisy of these farmers who have their hands out when they need help, but whine about any government aid for people in the cities.

      July 18, 2012 at 4:02 pm | Report abuse |
  9. The ***** partyman *****

    "It's the end of the world as we know it...it's the end of the world as we know it..and I feel fine."

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

    It's divine wrath for the preaching of prejudice and intolerance.

    July 17, 2012 at 2:24 pm | Report abuse |
    • JB

      Or it's just hot and not raining...

      July 17, 2012 at 4:01 pm | Report abuse |
    • Testiclese

      As logic would dictate Captain.

      July 17, 2012 at 10:34 pm | Report abuse |
    • Repent

      True Story.

      July 18, 2012 at 10:29 am | Report abuse |
  11. William

    How about we as a country stop outsourcing chunks of our crops to feed the rest of the world.We need to start looking after our fellow countrymen First.There are enough people in this country out of work with children that could use some help.

    July 17, 2012 at 2:26 pm | Report abuse |
    • Raquel

      I agree 110%

      July 17, 2012 at 2:37 pm | Report abuse |
    • Portland tony

      That's what food stamps do...They help feed poorer families by increasing their purchasing power, this allows markets to keep employees to sell the food and that helps create a greater demand for farm products. The WIC program also helps pregnant women and women with youngsters the same way.

      July 17, 2012 at 2:44 pm | Report abuse |
  12. Andrew

    Sorghum and other crops can tolerate extreme draught and still produce food. Not ethanol, food.

    July 17, 2012 at 2:27 pm | Report abuse |
    • bobjective2

      So how do you propose transporting that food to you? Transportation is the largest cost of the food that you buy.

      July 17, 2012 at 2:31 pm | Report abuse |
  13. Norm

    Without any doubt
    We're having a drought
    We haven't had any rain.
    But don't blame it on warming
    It's just not storming
    and it's all going down the drain.

    July 17, 2012 at 2:29 pm | Report abuse |
    • Ann Brush

      Brilliant

      July 18, 2012 at 4:16 pm | Report abuse |
  14. Andrew

    No, it's Divine punishment for the majority of GOP farmers who are racist, sociopathic, welfare queens who hate Obama because he's black and use Jesus as a tool of hatred and oppression.

    July 17, 2012 at 2:30 pm | Report abuse |
    • conoclast

      Well said!! ...and them's their good points!

      July 17, 2012 at 3:20 pm | Report abuse |
    • tribecagal

      Amen brother!

      July 17, 2012 at 4:04 pm | Report abuse |
    • silvereagle

      I don't hate Obama,but what has he done these last 31/2 years.Can you say NOTHING?

      July 18, 2012 at 6:12 am | Report abuse |
    • noteabags

      I'm glad you asked that question. I don't say "nothing". How about these for starters:

      Appointing two Supreme Court Justices
      Financial industry reform
      Preventing a 2nd Great Depression
      Passed legislation to curb greenhouse gases and improve the environment
      Nuclear non-proliferation agreement
      Repairing Our Image Abroad
      Reversed George W. Bush’s ban on federal funding to foreign organizations that allow abortions
      Implemented education reforms
      Tobacco regulation
      Repeals DADT
      Beginning the withdrawal of US troops from Iraq
      Removed restrictions on embryonic stem-cell research
      US Auto industry rescue plan
      Ended media blackout on war casualties; reporting full information
      Limits on lobbyist’s access to the White House
      Increased infrastructure spending (roads, bridges, power plants) after years of neglect
      Ended the previous policy; the US now has a no torture policy and is in compliance with the Geneva Convention standards
      Visited more countries and met with more world leaders than any president in his first six months in office
      Attractive tax write-offs for those who buy hybrid automobiles
      Expanded the SCHIP program to cover health care for 4 million more children
      Closed offshore tax safe havens
      Ended the previous policy of offering tax benefits to corporations who outsource American jobs; the new policy is to promote in-sourcing to bring jobs back
      Lower drug costs for seniors
      Ended the previous practice of forbidding Medicare from negotiating with drug manufacturers for cheaper drugs; the federal government is now realizing hundreds of millions in savings
      Improved conditions at Walter Reed Military Hospital and other military hospitals
      Ended previous policy of awarding no-bid defense contracts
      Improving benefits for veterans
      Ended previous practice of having White House aides rewrite scientific and environmental rules, regulations, and reports
      Making more loans available to small businesses
      Limited salaries of senior White House aides; cut to $100,000
      Attempting to reform the nation’s healthcare system which is the most expensive in the world yet leaves almost 50 million without health insurance and millions more under insured
      Killed Osama Bin Laden

      July 18, 2012 at 6:33 am | Report abuse |
    • rh

      I suppose you don't realize that THAT is what independents are afraid of – that Romney WILL do something. Keeps me up at night, thinking Mitt could be elected, along with the fear that the sun will explode.

      July 18, 2012 at 9:12 am | Report abuse |
    • webknight18

      Are u expecting him to make it rain? There is a long list of things Obama has done, but you would probably need a bran to understand that.

      July 18, 2012 at 11:39 am | Report abuse |
    • Derp

      Killing Osama Bin Ladin doesn't count?

      July 18, 2012 at 3:44 pm | Report abuse |
    • Joe P.

      First, what has that got to do with this post? Are you blaming him for the weather, too?

      July 18, 2012 at 3:58 pm | Report abuse |
    • s kel

      Dummy its not the Pres. He has constantly come up with economic recovery plans. But the hate filled obstructive tea trash conservitive fools like you voted in has blocked every effort to put this counrty on tract that your "awsome dude". dummy of a pres. (bush) destroyed.

      July 19, 2012 at 1:12 am | Report abuse |
    • Obama Mama

      In Bush's 8 years as president he created 1,08 million jobs.Federal jobs grew by 50,000 jobs and government jobs grew by 1,753,000. Bush lost more jobs and weakened the income growth more than what has been reported in 6 decades.
      Over 4,400,000 million jobs lost during the Bush era before Obama took office.
      President Obama has created 4.4 million so far. 4, 373,000 private sector jobs.
      So I would say create jobs. Our country only started to decline when the GOP congress came in. Touting they would make the president fail.
      Also Jon Sununu said yesterday the Gop wealthy are not going to create jobs as long as President Obama is in office. Saying they are sitting on their money and not creating the jobs promised if wealthy got the tax credit. He also went on to say if President Obama is re-elected they will take their businesses overseas-outsourcing. I say Bon voyage GOP, and let's tax them when the wealthy try to bring their products in America.

      July 19, 2012 at 10:08 am | Report abuse |
    • Rick

      Amen.

      July 18, 2012 at 7:01 am | Report abuse |
    • jimmer

      hate much andy?......you're a hoot.....lol

      July 18, 2012 at 9:04 am | Report abuse |
    • Tom

      You should be punished for being congenitally mor onic.

      July 18, 2012 at 10:29 am | Report abuse |
    • Rob

      sounds like your the hater.

      July 18, 2012 at 12:20 pm | Report abuse |
    • BRIAN KOVACS

      Well put Andrew. We can't afford another "son of" a Millionaire.

      July 18, 2012 at 3:16 pm | Report abuse |
  15. George Castanza

    I am going to do the opposite of what I would normally do for a while. Let everyone but me have his way.

    Quit subsidizing farmers for crops; legalize drugs; give everybody all the guns they want; take the government out of the equation. After doing all that, you'll all have what you want... and now I want to see you live with what you've got. You may find out that what you think is great is bigger than the little picture you had in your head. Good luck. I'm moving out of the country.

    July 17, 2012 at 2:32 pm | Report abuse |
    • Joe P.

      Hey, we already have a good example of a country just like the one you described: it's called SOMALIA!

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