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. jimdog33

    My wallet dried up long ago...

    July 17, 2012 at 5:11 pm | Report abuse | Reply
  2. Midwest Farmer

    Quit Complaining about higher prices. You will still have an income from your desk job that will allow you to pay a few cents more. Our crops are our income for the year to pay bills and buy groceries for our families. Yes, farmers learn to have crop insurance and the federal goverment will help (I hope) off set the loss of the crop, but the insurance won't even make most break even for the year, which in turn could result in a farm going under. Higher prices is the complaint, ha, Elementary Economics.....It's called Supply and Demand! We didn't ask for this drought, we wouldn't wish this on our worst enemy! Maybe everyone that saying "My garden looks great" should quit going to the store to buy all your food and grow it all yourself. A 20 foot by 20 foot garden is a lot different then a farm that is over 1000 acres! Irragation is great but it isn't free, fuel or electric still costs money. Look outside the little box that you all live in and walk a mile in my boots, I do believe you would change your thoughs before you made it a quarter mile. Just Remember: NO FARMS, NO FOOD.

    July 17, 2012 at 5:16 pm | Report abuse | Reply
    • Obama Mama

      Have we hugged our farmer's today? Hug a midwest farmer. I have a garden, cannot replace my grocery shopping bill though. Hope a second crop will take, rain dancing and sending your way.

      July 17, 2012 at 9:04 pm | Report abuse |
  3. biglio

    all red state, gop voting. god fearing republicans .....all just waiting for the federal government to help them! Typical republicans, scream and shout against uncle Sam till you need it...and then incapable of seeing the light even when it stares in your face, d as soon as possiblerought is over, rush says global warming doesn't exist, gop is the best at protecting your interest because it will shrink the government and get out of any climate change agreement...ah, almost forgot, free Kool aid for everyone!!!!!!

    July 17, 2012 at 5:18 pm | Report abuse | Reply
  4. Jed

    I wonder when the folk are gonna declare their shock at his pleadin not guilty for this at this plea hearin? Prolly the same folks who bleve that global weatherin is reel. yea thats a good one. Hello, since when are humans responsible for anythin they do? Perecically why I always go armed. It be interesting to know how bush got obama to do this.

    July 17, 2012 at 5:25 pm | Report abuse | Reply
  5. vet4life63

    I am a farmer. This post is for all of you, that somehow think that farmers somehow are giving you the shaft. Consider the following: Subsidies for "not raising crops" are a thing of the past. World population is growing everyday, and we are doing our best to keep up with it, but it is outpacing even the latest technology. What you refer to is CRP land, which is land set aside for Conservation, which in many cases has been released from that program due to the drought. Some of it will contain grasses that will be used for hay. Unfortunate for the wild animals that were being "conserved" but consumers don't want to pay more for food. A farmer get's typically 25% of the price you pay at the store, but shoulders over 50% of the cost of producing that product, and shoulders even more if you count labor. Is YOUR labor worth anything? Crop farmers have to pay for fuel, equipment, repairs to equipment, herbicide, seed, fertilizer and on and on. General mills on the other hand, pays for Labor and equipment to process that corn into corn flakes for example, packaging and transport costs. Then it is sent to the retailer, who must pay employees to run the store, and warehousing costs in some cases. For your box of corn flakes it figures out something close to this. the farmer puts in 85 cents and receives a dollar. The Mill puts in .75 cents and receives $2.00. The store puts in .30 and receives 1.50 and you wanna know why your cornflakes cost you $4.50? The farmer is the one taking all the risks, and getting the least amount of return IE .15 return on that box of flakes. With a drought some farmers, can't even break even. Supply and demand takes over, but the Mill or the Store doesn't want to take the hit, so guess who takes the hit? The Farmer and the consumer both.

    July 17, 2012 at 5:28 pm | Report abuse | Reply
    • jackie

      Well said and so true. There are many people we thank every day but the farmer is always overlooked.

      July 17, 2012 at 5:45 pm | Report abuse |
    • banasy©

      Thank you for putting it in perspective.
      I also have friends who are farmers, and it is a hard life; they are *far* from wealthy!

      July 17, 2012 at 5:52 pm | Report abuse |
    • enlightened4

      It is not a "could", it will hit everyone's wallet. Hopefully Farmers have crop insurance and will survive to plant again. God bless them.

      July 17, 2012 at 6:06 pm | Report abuse |
    • Cityzen

      What's even worse is the farmers don't even get to make the prices so they are at a loss depending on the market.

      July 17, 2012 at 6:12 pm | Report abuse |
    • Obama Mama

      I always wonder why, the farmers cannot have factories in the community and make their own cornflakes? Or Wheaties? Just wondering.

      July 17, 2012 at 9:09 pm | Report abuse |
    • Lisa Wilson

      Tell them how it is please. I grew up on a farm & it's working from sunrise to sometimes long after sunset 7 days a week. If you lived in Europe food prices would be much higher. These so called farm subsidies are keeping you from paying more for food. You'll figure it out in a few more years I'm sure. If you lived in Asia or Africa you may not even be able to get food , if you had the money. Be grateful!

      July 20, 2012 at 5:10 am | Report abuse |
  6. zoltron

    excuse me, what aisle is the small batch bourbon on?

    July 17, 2012 at 5:29 pm | Report abuse | Reply
  7. John

    Clearly Bush did this to us!!

    July 17, 2012 at 5:29 pm | Report abuse | Reply
  8. Aletheya

    World grain reserves add up to only 3-4 months of consumption. If crops fail, prices will noticeably increase in just a few months. Prices will spike due to this drought in 2013.

    July 17, 2012 at 5:32 pm | Report abuse | Reply
  9. SaveWater

    save water – repair infrastructure – create jobs: Our gray water that goes down the drain from sinks and showers could be rerouted to water our gardens.

    July 17, 2012 at 5:38 pm | Report abuse | Reply
  10. uche

    its a devine wrath for lagalizing aborminations. what is not even acceptable wit animals are now legalized in ur country. what do u xpect when try to fight nature. nature ll fight back.

    July 17, 2012 at 5:50 pm | Report abuse | Reply
  11. humtake

    I don't understand why the media has to tell us that our wallets will be taking a hit for blah blah blah. Our wallets take a hit for ANYTHING that happens. What, a farmer tripped on his shoe lace, guess we have to raise prices. Huh, a butterfly goes splat on a windshield, guess we have to raise gas prices. Omg, a fish just ate an entire crop of frog eggs, guess we have to raise milk prices.

    Start putting out stories about how consumers will be paying less for things and then it might actually be considered news. Saying we are going to have to pay more for something is just business as usual and is not news.

    July 17, 2012 at 5:54 pm | Report abuse | Reply
  12. rjohnson

    ppl on this blog are insane!!!!

    July 17, 2012 at 5:55 pm | Report abuse | Reply
  13. uche

    leave democrats out this. u are dealing with nature now. Guy mariage is an abormination. animals can not accept it. But ur Govt legalized it.

    July 17, 2012 at 5:56 pm | Report abuse | Reply
  14. Don

    Can someone tell me why there is no aqueduct from the great lakes to the Midwest to water crops and animals? Hell in Calif we get water from much farther away than OK is from the lakes! This country is so messed up, no one thinks with their brains anymore.
    We spend billions on wars to fix somewhere else in the world but we wont do anything positive to fix this place.

    July 17, 2012 at 6:05 pm | Report abuse | Reply
    • rob2tall

      You are 100% right!
      Why are we not building a better water system for farming?

      July 17, 2012 at 6:29 pm | Report abuse |
    • Thermion7

      logistics, cost and water rights.

      July 17, 2012 at 6:33 pm | Report abuse |
    • Buckee

      Too many Barfoid Crickets will be destroyed in the construction of an aquaduct.. Sorry, your family will be mighty thirsty and hungry, but the crickets will be just fine.

      July 17, 2012 at 6:43 pm | Report abuse |
    • A

      I'd like to know the same thing. I live next to Lake Michigan, but get my water from some little private community well and pay through the nose. It's like I'm living in AZ!!We had a new cars worth of landscaping done last summer and while it is under warranty for a year, I can't let all of it die. I guess I'll be weeping when I see my $1000 bill.

      July 17, 2012 at 7:45 pm | Report abuse |
    • BC

      In most years there is adequate moisture from rainfall. It wouldn't be cost effective to purchase equipment and such that would be needed for the occasional dry years.

      July 17, 2012 at 7:54 pm | Report abuse |
  15. paula

    We are overdosing on corn and HFCS.We can eat a lot less of it by staying away from packaged and processed foods,corn chips,soda,factory-farmed meat etc.

    July 17, 2012 at 6:07 pm | Report abuse | Reply
    • Buckee

      66% of Americans are fat or obese - are YOU going to take that food out of their mouths????? The body cannot tell the difference in the source of the sugar. Sugar is Sugar, Gorging is Gorging.

      July 17, 2012 at 6:46 pm | Report abuse |
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