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. John from Illinois

    I can not believe the idiot posts out here. This is a natural disaster. It's not political. It's not the farmer's fault. Man has done this to himself. We are overpopulating and over consuming our natural resources. Anyone who doesn't think climate change is real, needs to wake up and smell the burnt flowers. The one and ONLY solution is mass extinction of the human race. And based on some of these STUPID comments, the sooner the better.

    July 17, 2012 at 6:11 pm | Report abuse |
  2. orion7x

    BTW a drought already hit my wallet...

    July 17, 2012 at 6:19 pm | Report abuse |
  3. Camdens_Log1982

    C'mon! The farmers are getting "subsidies" (it's called "welfare" where I'm from) for situations like this. Now, let me make sure I have this right: The GOP grants "subsidies" (taxpayer's money) to farmers. The GOP cuts "welfare" to the needy and/or make it difficult to purchase legitimate goods. So, then, the farmers ship their crops to market (what's left of it because they're getting "subsidies" anyway). Once at market, the welfare people can't afford to purchase corn, tomatoes, onions, cabbage, etc., because the GOP slashed welfare benefits. Sickening.

    July 17, 2012 at 6:20 pm | Report abuse |
    • BC

      The majority of farm subsidies go to a small percentage of farming/ranching producers. There are many who get nothing.

      July 17, 2012 at 7:57 pm | Report abuse |
  4. rjohnson

    the drought has been hitting us since 1913....they started the tax law that yr.

    July 17, 2012 at 6:28 pm | Report abuse |
  5. Leroy

    Could someone explain to me a) what is an "upper level ridge" and why doesn't it fall to the ground, b) why would a "La Nina" in the Pacific cause no rain to fall when the moist Gulf and Gulf Stream are nearby, and c) why we have so much learning and accomplishments, yet still can't make it rain a little on a farm.

    Please take a moment to try to answer me, than you can go back to the silliness with Republicans and Democrats, Global Warming and our approaching "doom" and whatever. Thanks.

    July 17, 2012 at 6:37 pm | Report abuse |
  6. Joan

    Hit all you want. There is nothing left in my wallet

    July 17, 2012 at 6:47 pm | Report abuse |
  7. Wayne B. Wright

    There is not anything I can do about the drought. What will be will be.

    July 17, 2012 at 7:00 pm | Report abuse |
  8. dastreagus@gmail.com

    To excite young voters a presidential candidate should mention bath salts being way messed up, and basically talk about how crazy that dude on bath salts was, then say... I mean weed wll make you a lazy pos, but bath salts are totally illegal under me. He was tring to juke the camera with his eyes. It's a camera, it isn't going to look away because you are freaky, it is going to keep looking. And weed isn't as bad. Bam youth vote.

    July 17, 2012 at 7:57 pm | Report abuse |
  9. LogicalThinker

    While corn is a deader, there is opportunity for alternative crops to now come into their own. The companies who get into alternatives soonest will reap the most benefits.

    This will alter the production of ethanol with potential benefits coming from using better production methods from alternative crops.

    It is entirely possible that this seeming calamity could turn out to be beneficial if what results from this juncture is an improvement. We've been caught up in using corn because no one wants to venture elsewhere. Now may be the chance to explore and to try something new.

    July 17, 2012 at 8:26 pm | Report abuse |
  10. Ned Racine

    Wait a minute! This is impossible! Republicans keep telling me climate change isn't happening, and that if we just keep giving the rich tax breaks everything will be OK!

    July 17, 2012 at 8:30 pm | Report abuse |
  11. Sean

    If you want Great Lakes water, live in Michigan. Great lakes water should NEVER be piped ANYWHERE, EVER!

    July 17, 2012 at 8:44 pm | Report abuse |
  12. bhs

    everything HITS my wallet. Why would this be any different? The US taxpayers (the little guys) are getting screwed. Why would this be any different. We have yet another corrupt administration in the white house filing their pockets. When will we rise up. I see a USA Spring on the horizon. It's time to revolt. NOW!!!!!

    July 17, 2012 at 8:51 pm | Report abuse |
    • loverpoint

      Why don't you revolt against your god you've been praying for rain too? With all those bible belters you'd think that god would listen to one of them.

      July 17, 2012 at 8:59 pm | Report abuse |
    • b

      giddy-up, I'm there!

      July 17, 2012 at 9:03 pm | Report abuse |
    • CaScOc

      Simmer down. Now, the vultures known as commodities speculators, who don't have the desire or the capability to put corn to a commercial use, are going to swoop in and take up 90% of the corn futures contracts. This will drive up the price of corn through the roof.

      July 18, 2012 at 12:26 am | Report abuse |
    • maltytasker

      You think the current administration is corrupt? The Romney campaign is taking in hundreds of millions of dollars in contributions from billionaires and big corporations. If he gets elected, those folks will be looking for a return from their investment. Government corruption would take on a new meaning.

      July 18, 2012 at 12:50 am | Report abuse |
    • Tr1Xen

      I'm just anxious to "spring" Obama from the Oval Office. November can't get here soon enough!

      July 18, 2012 at 2:39 am | Report abuse |
  13. bhs

    It's not just Dems and GOP. It's ALL of them. cheats liars and thieves.

    July 17, 2012 at 8:52 pm | Report abuse |
  14. Coco

    Six ears for $1.98
    Last year, twelve ears for $1.98

    On the bright side, twin lobster dinners are back for $12.95 including half a cob of corn, red potatoes, drawn butter, and coleslaw. They are culled though.

    July 17, 2012 at 9:24 pm | Report abuse |
  15. 0rangeW3dge

    Think, "Dust Bowl"

    July 17, 2012 at 9:26 pm | Report abuse |
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