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. NorCalMojo

    I doubt it'll be much of a problem in the US, but the countries that rely on US exports for their food supply are going to be hit hard.

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

      Stop. Putting. Ethanol. In. Gasoline. It screws up the price of corn, which is especially hard on the poor, and doesn't help the environment.

      July 18, 2012 at 11:40 am | Report abuse |
  2. stacey

    OK..As I look out my window at my short corn crop, I am astounded by the different points of view on there. You can count on a dry year once every 10 years. This is not a dry year it is a drought. This is the first since 1956. Last year was so fricken wet you could not plant and had great difficulty harvesting. You really can't say global warming until we have another year of drought. You can say climate change for sure, but I can't say global warming yet. Anything to support a politcal agenda. Farmers may just get the respect they deserve...as you do not get to enjoy cheap food this year. Sadly, it is not the farmer but the grocier that will get rich. Also, too many to count will starve and that breaks all of our hearts.

    July 18, 2012 at 11:42 am | Report abuse |
  3. Senor Ed

    Just pray away the dry.

    July 18, 2012 at 11:56 am | Report abuse |
    • Bosco08

      Awesome! Well said.

      July 18, 2012 at 12:15 pm | Report abuse |
    • Jen

      damn. Where is that pesky 'like' button ?

      July 18, 2012 at 12:36 pm | Report abuse |
  4. OxyRush

    This drought was caused by that Kenyan muslim terrorist in the White House as part of his plan to destroy America.

    July 18, 2012 at 12:01 pm | Report abuse |
    • jane

      You forgot to take your medication. You're delusional.

      July 18, 2012 at 12:08 pm | Report abuse |
  5. John

    Search for the "Historic Palmer Drought Indices" that is managed by NOAA's National Climatic Data Center. It is an amazing site that goes back 100 years of precipitation records in a color coded map broken into states and broken down into county like targets. Check it out, it's really simple to use, and the data you gather is an education in climate cycles.

    July 18, 2012 at 12:07 pm | Report abuse |
  6. SETXresident

    It has rained everyday for almost two weeks straight here in Houston. We would gladly send a few days worth up to anyone who needs it.

    July 18, 2012 at 12:12 pm | Report abuse |
  7. Bob

    The key world here is "could" it my not at all. Stop trying to spread the fear CNN.

    July 18, 2012 at 12:24 pm | Report abuse |
  8. Roger smith

    if this is the worse since the 1950"s can a liberal who belongs to the AGW religion tell me how man caused the draught in the 1950's?

    i really would like an explanation.

    July 18, 2012 at 12:37 pm | Report abuse |
  9. EatLessandSaveMoney

    Eat less and eat less red meat, you'll be doing yourself a favor. You don't need metamucil if rice and beans are your main dietary staple. I cut red meat to once a week and eat a bit less in general. Saving money and I lost 13 lbs in a month. Try it, you won't regret it.

    July 18, 2012 at 12:38 pm | Report abuse |
  10. JOSEUSMC0311


    July 18, 2012 at 1:05 pm | Report abuse |
  11. shawna

    All the more reason to buy local.

    July 18, 2012 at 1:07 pm | Report abuse |
  12. Common Sense

    Your fellow man is what's for dinner

    July 18, 2012 at 1:13 pm | Report abuse |
  13. swin - Pittsburgh

    I think we should forget using the corn for food for ourselves or for livestock and turn all that is left after the drought into ethanol so that we can burn it in our cars and reduce our gas mileage by 10-20% while at the same time damaging our cars' engines. And since it takes about 1.2 barrels of oil to produce one barrel of ethanol, as an added advantage, we'd be increasing our foreign oil dependence at the same time. At least one person in this country would be happy as a result, and his middle name is Hussein.

    July 18, 2012 at 2:14 pm | Report abuse |
    • Scott

      you're a f00l.

      July 18, 2012 at 3:47 pm | Report abuse |
  14. Denny

    The headline should address how the draught will affect the availability of food, NOT your wallet. Eating is kind of important, at least for some of us. Focussing on costs tells me your headline writer has their priorities of what is really important in life all goofed up.

    July 18, 2012 at 2:24 pm | Report abuse |
    • clark

      Wanna know how the drought effects my wallet? I can't seem to get corn to grow in the damn thing.

      July 18, 2012 at 3:17 pm | Report abuse |
  15. JR

    If Americans ate differently, this wouldn't be such a huge problem. Go to your local grass-fed beef farms. Try a local farmer's market, where food is produced on a smaller, more organic, scale. Eat less red meat. Not only will you see a positive impact in your wallet, but in your over-all health as well. Grow your own garden, raise some chickens – even when I lived in an apartment, we grew tomatoes, peppers and herbs on our fire escape. Eat smarter people!

    July 18, 2012 at 2:33 pm | Report abuse |
    • jcjimmy

      Grass-fed beef? Do you think corn is the only plant that is effected by the drought?

      July 18, 2012 at 3:14 pm | Report abuse |
    • FarmersWife

      That's the thing the article doesn't hit on. There has to be grass for there to be grass fed cattle. Most of us in the midwest are already feeding out hay that we normally wouldn't start feeding until fall...and there isn't any rain for there to be a second cutting of hay. The drought effects much more than just corn.

      July 18, 2012 at 3:51 pm | Report abuse |
    • Ann Brush

      JR, I am sure America's farmers will be delighted to learn they have all of your apartment's fire escapes to grow crops in. The farming community needs millions of rain watered acres and you offer a fire escape. No points for guessing you never farmed a thing in your life.

      July 18, 2012 at 4:00 pm | Report abuse |
    • Laf

      Are you being serious? You want everyone to believe that you grow enough food for "we" so presumably more than one person, on a fire escape (gee that's not a fire hazard), for your daily meals, year round?

      I think the only thing you must be growing is grass, because you'd have to be pretty high to think that growing a few plants is anywhere near comparable to what farmers have to deal with, not to mention how asinine it sounds when you attempt to make your garden sound like anything that would be able to sustain life for any significant amount of time.

      July 18, 2012 at 5:49 pm | Report abuse |
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