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. noteabags

    How ironic that the cons in the midwest are the ones denying global warming. No worries, the government will pay them for their loss – farmer welfare.

    July 18, 2012 at 6:30 am | Report abuse |
  2. Rob

    one would think that if there isnt enough food for the number of animals, a culling would be next, resulting in a glut of meat and lower prices at the store....

    July 18, 2012 at 7:29 am | Report abuse |
    • Mj

      Exactly, and that is what the article said. Prices for meat and dairy products will fall as farmer's cull their herds and will rise after that, when there is a shortage of meat and dairy because the herds have been sold. My sister in the Midwest is going through this now. They are selling the dairy cattle and probably butchering a few of the lower quality animals for their own personal consumption, because the price of corn is already sky-high. Their corn crop was destroyed by hail. They replanted but the new corn isn't coming up because of the drought. They simply can't afford to keep feeding the dairy cattle with the high price of corn. Pray for the farmers. It is a tougher life than you might realize, and government subsidies do NOT always come in time to help.

      July 18, 2012 at 8:04 am | Report abuse |
  3. cobra129

    Worst President in US history is costing us even more, far more than any dorught...........I'd prefer the drought to obama anyday

    July 18, 2012 at 7:30 am | Report abuse |
    • Marci

      Reallllllyyyyyyyyyy lol

      July 18, 2012 at 7:53 am | Report abuse |
  4. cobra129

    Time to end the Fed and put monetary responsibility and accountability back where it belongs........Congress, they've shirked their duties far too long

    July 18, 2012 at 7:38 am | Report abuse |
  5. joe

    of course it will cost us more now, thanks to CNN for giving local merchants the idea and a reason to raise prices

    July 18, 2012 at 7:47 am | Report abuse |
  6. Marci

    Maybe the farmers should have spent some of their profits on irrigation systems

    July 18, 2012 at 7:52 am | Report abuse |
    • SDfarmer

      Honey, you need a biology class.

      July 18, 2012 at 8:00 am | Report abuse |
  7. angryersmell

    Has anyone noticed that we've got a lot more people to feed than we did in 1956? Just curious.

    July 18, 2012 at 7:52 am | Report abuse |
  8. EternalFlame

    I know...

    Let's pretend global warming doesn't exist, and then blame the weather on an invisible man in the sky who's upset about gay marriage!

    July 18, 2012 at 7:58 am | Report abuse |
  9. Fortean

    The article talks about drought but fails to mention the cause which is climate change. It's not about to get better either.

    July 18, 2012 at 8:03 am | Report abuse |
  10. Norm

    The same guys who say THERE IS NO GLOBAL WARMING are no putting PResident Obama at fault of a lack of rain caused by Global Warming. Insane in the main brain

    July 18, 2012 at 8:04 am | Report abuse |
  11. DL

    Whatever we do, let's not keep bailing farmers out with Govt aid & subsidies... that's socialism

    July 18, 2012 at 8:12 am | Report abuse |
  12. TonyMontana1

    Make cuts in welfare so the moochers can help with the cost too. Just sayin

    July 18, 2012 at 8:22 am | Report abuse |
  13. Smako

    Doesn't anyone in journalism think for themselves anymore? May? Even if the parched farmland received 5 inches of rain this week, the damage has been done. It WILL cost us. BET your last drink that the Feds will still ship tons of grain over seas to nations that burn our flag for half the cost the farmer gets to sell it to Americans cutting our own supply.

    July 18, 2012 at 8:27 am | Report abuse |
    • ray

      i tarted growing tomatos two months so im ok... im eating already.... i plan to grow my own fish and have some chickens..my plan is to be somewhere between 20 to 50 percent free of the food system by next year.

      July 18, 2012 at 8:34 am | Report abuse |
    • steve

      Feds don't ship anything the corns on the world market. We live in a capitalistic environment.

      July 18, 2012 at 8:50 am | Report abuse |
    • Kevin

      I have to say that I know nothing about this. I am not being sarcastic when I say to please provide some links or resources where I can learn more about this.

      July 18, 2012 at 8:51 am | Report abuse |
    • tomz

      Or worse, we will continue to give subsidies to farms to let their fields stay empty. Especially to corporate farms.

      July 18, 2012 at 9:06 am | Report abuse |
    • Neeneko

      Wow, that is just so wrong it is not funny...
      (1) All that food aid is VERY profitable to farmers. We seriously overproduce and if the fed didn't push ways to use up all that excess corn prices would collapse.
      (2) That food aid utterly decimates the countries we send it to. Wars and famine have been traced back directly to the corn we shove down the throat of the world.

      I feel for the families effected by this, but corn farmers and their lobby have caused so much suffering in the world, and so many health problems in the US, at an industry level I have little sympathy left for them being a little less profitable this year.

      July 18, 2012 at 9:19 am | Report abuse |
    • DandyStryker

      What an idiot. The feds don't sell grain overseas - American capitalists do that.

      July 18, 2012 at 9:21 am | Report abuse |
    • Rudy Varn

      If there will not be enough corn to feed livestock (and there won't be) , why are we using 5 billion bushel of corn to make ethanol. Tests have shown that it basically takes the same amount of energy to produce the corn as what energy (BTU's) you get back from the ethanol. Ethanol only has 55% of the BTU's as gasoline. And why are we forcing blenders to blend ethanol with gasoline (which forces the consumers to buy the blended mixture) when the ethanol costs about the same per gallon as pipeline gasoline, and ethanol is only worth 55% of the value of gasoline.

      July 18, 2012 at 9:23 am | Report abuse |
    • eric


      I am interested in how you plan to grow fish. Fish trees? Heheheh. All jokes aside, I've grown tomatoes and other stuff the past two years. Never have done it before, and even still I got a good haul. It's really rewarding!

      July 18, 2012 at 9:50 am | Report abuse |
  14. Chat

    God is punishing America for causing mayhem in the Middle East.

    July 18, 2012 at 8:30 am | Report abuse |
  15. MrSmooth

    Who cares........ a farmer factors in the cost of a bad crop season anyway. If the prices go up it will be more profit for them.

    July 18, 2012 at 8:41 am | Report abuse |
    • Matt

      Yes the prices go up because there is less corn to sell. The farmer ends up making less money.

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

      Mr Smooth where did you come up with that nonsense. The farmer does not set the price of their product, they are told what they will be paid.

      July 18, 2012 at 9:05 am | Report abuse |
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