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. pvd

    It started striking me a few weeks ago that in "mainstream" news coverage of the current U.S. heat and drought conditions, the term "global warming" does not appear. Indeed, in this article, "How the drought could hit your wallet," the expression does not occur. It only appears in preceding comments by "rh" and "Wait!!" Thank you Tea Partiers for having intimidated the "mainstream" media into not presenting a scientific account of events.

    July 18, 2012 at 10:32 am | Report abuse |
  2. Dale

    The United States food supplies is in big trouble because of this drought.
    Wall Street continues to export American food produce, to Asia because their currency is stronger.
    “”Food crops are being manipulated”” less acreage being planted to increase price.
    Washington D.C. “”Feed corn being made into ethanol””, also Wall Street commodities exporting feed corn and alfalfa to Asia and other countries because there currency is stronger.
    Meanwhile FOOD inflation continues to go up and up here in the United States,

    Wall Street and Washington D.C. they do not even know what inside of a grocery store looks like.

    These FAT CATS just sit down at a table eat and pay for it with their bank credit card.

    Wall Street and Washington DC are “”clueless and completely disconnected”” from the real world; “”they just listen to clueless economy analysts”” and look at fixed numbers they want to see.

    July 18, 2012 at 10:32 am | Report abuse |
    • jesus

      What the hell is your point in this post? You obviously know nothing about agriculture. You're an idiot.

      July 18, 2012 at 10:47 am | Report abuse |
  3. Leon

    The farmers in the story are doing something wrong. In my area the farmers get checks for everything. They get paid to plant or get paid not to plant. They get checks if the yield is high and if the yield is low. They'll get their checks for low yield this year and be just fine. They vote Republican and resent anyone else getting help from a social program but are themselves the biggest welfare queens on earth.

    July 18, 2012 at 10:34 am | Report abuse |
    • Dr. Ruth

      I know a farmer that cries the blues ""I don't make any money" he says.. he jus got delivery of a new $350K John Deer Tractor.. and last year he got a new Massey Ferguson Combine $960K..
      Yeah.. he doesn't make any money..

      July 18, 2012 at 11:30 am | Report abuse |
  4. MakeThemEatCake

    Great Lakes, one of the largest (if not THE largest) source of fresh water in the world is a pipeline away. Wait, we only build pipelines for sand/oil sludge that can be exported (sold on the open market). Turn on during slight to severe drought conditions in the farm areas of this country (oohh, jobs and a source of income for the states bordering the lakes) and turn it off when not necessary.

    July 18, 2012 at 10:36 am | Report abuse |
    • Dr. Ruth

      The great lakes do not belong only to the US.. Keep your paws away from them..!!

      July 18, 2012 at 11:32 am | Report abuse |
    • Falco

      The Great Lakes are an area where soils are overconsolidated due to glacial actiity. The weight of the water is holding the soil down and in place, removing weight would cause the soils to rebound up and then could not be pushed back down without the weight of something like a glacier again. Once you remove the water and the floor of the lake rebounds up, there is no putting that water back, it's gone forever.

      July 18, 2012 at 12:07 pm | Report abuse |
  5. Andrew

    Is there a story on faux about how Michelle Bachman blames this rain on the almighty holding back the rain while we have Obama in office yet? I remember she was in news about hurricanes a year or 2 ago saying it was due to morals etc....

    July 18, 2012 at 10:42 am | Report abuse |
    • Dr. Ruth

      She is hillarious.. never seen a bigger Duth in my life.. she doesn't say a thing that makes sence or is true.. when I say truth I mean truth only on her imagination..

      July 18, 2012 at 11:35 am | Report abuse |
  6. bawevi

    There is NO drought. It's a lie and a conspiracy drummed up by the Democrats... just like the "global warming crisis," just like the "recession," just like "poverty," and just like "cigarette smoking is bad"... to distract us from the REAL issues, like that ticking noise in my new Lexus. I mean, I'm looking at the back window of my mansion right now at a golf course, and the sprinklers are running fine, the grass is green and healthy... so who do they THINK they are fooling?

    July 18, 2012 at 10:48 am | Report abuse |
  7. Jonvader31

    I wonder how this affects the Monsanto and other GMO crops, and what about the Govt subsidies? It was my understanding that the price of corn is controlled by major companies that own farmlands forcing independent farmers to farm at a loss forcing them into using govt money buying GMO seed or straight up selling to large Corporations.

    July 18, 2012 at 10:48 am | Report abuse |
  8. MIKE

    Who do you think is going to pay for this, the GOOD FAIRY. Everyone who buys products made from these raw materials you idiots and who will make the most money the speculators who are buying up futures right now and then stick it to John Q. Public

    July 18, 2012 at 10:52 am | Report abuse |
  9. Smeagel4T

    Another example of where we get to pay for Big Oil and Big Coal externalizing the true cost of their products onto society. If Big Oil and Big Coal were forced to internalize their CO2 pollution costs into their product, then it would be an honest "free market" in which the purchasers of oil and coal would have to make an honest decision about whether to buy it. Instead we have corporate socialism where the corporations are allowed to dump the costs of their products onto society as a whole, and everyone ends up having to pay for it.

    July 18, 2012 at 10:52 am | Report abuse |
  10. JPX

    What do the climate deniers (i.e. uneducated republicans) have to say about this?

    July 18, 2012 at 10:53 am | Report abuse |
  11. miki801

    In addition to the lack of rain, many farms have turned into agribusinesses. That is, they are huge multi-acre complexes, and produce one crop year after year. They use complex fertilizer,insect sprays,and engineered seeds. This allows that farm to produce the same crop year after year. While this will only continue as long as the farm land is profitable, we know from the dust bowl that it will not last forever. With the lack of rain adding stress to the land, it might just blow away again. When we think of government support for farms, corporate farm need to be included in the mix. The money does not just support small farms, (like Michelle Bachman's), with mom and pop and a hoe.

    July 18, 2012 at 11:03 am | Report abuse |
    • SPLAT!~

      The vast majority of these multi-acre agribusinesses are family owned and are incorporated for financial purposes. The use of complex fertilizer,insect sprays,and engineered seeds is necessary to feed 7 billion people. The farming practices of today are much different that the 1930's. At $7,000.00 – $10,000.00 an acre for Iowa farmland, the farmer is going to protect his investment so that it is profitable year after year.

      July 18, 2012 at 11:27 am | Report abuse |
  12. SPLAT!~

    Yeah, farmers are screwin us over! Oh, almost time for lunch!

    July 18, 2012 at 11:13 am | Report abuse |
  13. Barry G.

    The first angel sounded his trumpet, and there came hail and fire mixed with blood, and it was hurled down on the earth. A third of the earth was burned up, a third of the trees were burned up, and all the green grass was burned up.

    Revelation 8:7

    July 18, 2012 at 11:26 am | Report abuse |
    • LPChicago

      And Saul said, Thus shall ye say to David, The king desireth not any dowry, but an hundred foreskins of the Philistines, to be avenged of the king’s enemies. But Saul thought to make David fall by the hand of the Philistines. And when his servants told David these words, it pleased David well to be the king’s son in law: and the days were not expired. Wherefore David arose and went, he and his men, and slew of the Philistines two hundred men; and David brought their foreskins, and they gave them in full tale to the king, that he might be the king’s son in law. And Saul gave him Michal his daughter to wife.

      July 18, 2012 at 11:37 am | Report abuse |
    • LPChicago

      Then he went up from there to Bethel; and as he was going up the road, some youths came from the city and mocked him, and said to him, “Go up, you baldhead! Go up, you baldhead!” So he turned around and looked at them, and pronounced a curse on them in the name of the LORD. And two female bears came out of the woods and mauled forty-two of the youths.

      July 18, 2012 at 11:43 am | Report abuse |
    • Buckee

      Weather is cyclical - always has been, always will be. Those who want a steady-state system are living on the wrong planet.

      My area went through drought last two years, this year it rains twice a week. Water bill is low, but lawn equipment is all wearing out from the overwork.

      Mother Nature cannot be predicted. Sorry.

      July 18, 2012 at 12:02 pm | Report abuse |
    • Jayne Cobb

      (Hard as it now is to imagine, there was a time, not so long ago, when the fruit did not even exist in the Western Hemisphere.) It was not an easy path to reconstruct. Bananas did not move in a straight line.

      Banana: The Fate of the Fruit That Changed the World, Chapter 5: Asia

      July 18, 2012 at 12:41 pm | Report abuse |
    • tonyh110

      Only problem with your theory is although we have it hot in the US – over in the UK they've had one of the coldest wettest summers on record. Mother nature isn't a liberal wanting to spread the wealth she's a random machine apparently with PMS lately

      July 18, 2012 at 12:51 pm | Report abuse |
    • Primewonk

      Roddenberry 68:12 We must question the story logic of having an all-knowing all-powerful God, who creates faulty Humans, and then blames them for his own mistakes.

      deGràsse Tyson 1:1 God is an ever receeding pocket of scientific ignorance.

      Szilard 88:16 I'm all in favor of the democratic principle that one idiot is as good as one genius, but I draw the line when someone takes the next step and concludes that two idiots are better than one genius.

      July 18, 2012 at 1:54 pm | Report abuse |
  14. Steve

    I recall listening to a PBS program about 4 years ago on Global Warming where they were interviewing a few scientist. One of them predicted that the corn crop would be one of the first crops affected by a mere 3 degree F increase in average temperature as that is all it will take to singe the silk on corn that allows the plant to pollinate. Guess they were bang on. But alas there are a bunch of people sitting in Congress (and the Canadian Parliament for that matter) who are all convinced the science is wrong on all this. I know a few polar bears in northern Manitoba that can no longer travel on ice flows that beg to differ. I have seen that first hand!

    July 18, 2012 at 11:27 am | Report abuse |
    • Aeromechanic

      Conservatives absolutely refuse to admit that climate change is real, it happening before our very eyes. Technology has lessened the impact somewhat but it is real.

      July 18, 2012 at 12:35 pm | Report abuse |
  15. sputnick1

    The problem with this guy is he didn't did his pond deep enough. Then he wonders why it dried up????

    July 18, 2012 at 11:30 am | Report abuse |
    • rjkelly34

      Add grammer to our list of worries.

      July 18, 2012 at 12:26 pm | Report abuse |
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