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. sure sure

    wall street parasites on commodities futures are gonna suck the last drop of blood out of the 99%.

    July 17, 2012 at 3:14 pm | Report abuse |
  2. Mark - Atlanta

    DO NOT WORRY – DO NOT PANIC!!!! This drought is not caused by man-made global warming! Rush Limbaugh said that it wasn't on his HUGE radio show!

    July 17, 2012 at 3:14 pm | Report abuse |
  3. AndreaM

    So cut the middle creature out. If it costs a lot to feed animals corn plus the other costs of raising the animal, just eat the corn yourself. I'm not a vegetarian by a long shot, but I see nothing wrong with trading a pork chop dinner for say, fajitas which use less meat per serving or perhaps go all out and make some black bean burgers instead of using ground beef. It's simple stuff and it's not very difficult. Beans and lentils offer plenty of protine, are versitile in the kitchen, and they're cheap. Switching out one meat-centric dinner per week in my neck of the woods makes about $15-20 monthly savings. You don't even have to be fully vegetarian to reap significant savings.

    July 17, 2012 at 3:17 pm | Report abuse |
  4. LotusGirl

    Why the heck are we not producing our ethynol using switch grass instead of corn?! It's cheaper and contains a higher sugar concetration, making it dramatically more efficient! this was predicted years ago, the price increases, the food shortages. No one listened to the "hysterical hippies", and now the crisis has begun.

    July 17, 2012 at 3:17 pm | Report abuse |
    • TJ

      Quit being hysterical.

      July 17, 2012 at 3:25 pm | Report abuse |
    • bobjective2

      What food shortages?

      July 17, 2012 at 3:25 pm | Report abuse |
    • mac

      What's new. Just something else we are paying more money for. Corn, (groceries overall), gas.......pick something. Just bend over because one way or another we get $crewed.

      July 17, 2012 at 3:31 pm | Report abuse |
    • volsocal

      Ethynol is not cheaper or greener to produce than gasoline. And we don't have a food shortage, we have an intelligence shortage in Washington. Thousands of square MILES of farmland are sitting idle, dry as a bone, because the Pelosi-ites got a judge to restrain the use of large scale irrigation systems in Central California to protect a minnow.

      July 17, 2012 at 3:39 pm | Report abuse |
    • US farmer

      We don't make it from switch grass because 1) It takes like 3 years to establish it 2) It is not high in sugars like corn 3) It would require enormous amount of acres to produce enough, thus eliminating food acres 4) would require tens of thousands of semi-trucks on the highways transporting the bales to a biomass facility 5) would require massive infrastructure and is not feasible . I grow lots of corn myself and am not saying that it is the best idea to use for fuel. I AM JUST SAYING IT IS THE BEST IDEA WE HAVE RIGHT NOW. IN 10 OR 20 YEARS NEW TECHNOLOGY WILL ALLOW FOR SOMETHING ELSE TO BE USED FOR FUEL.

      July 24, 2012 at 6:52 pm | Report abuse |
  5. Bob

    This is George Bush's fault.

    July 17, 2012 at 3:20 pm | Report abuse |
    • Rightster

      This is Jimmy Carter's fault.

      July 17, 2012 at 3:28 pm | Report abuse |
  6. Blue state patriot

    It's hard to feel sympathy for the red states ("Global warming is a liberal lie!"), but we all end up paying for their ignorance.

    July 17, 2012 at 3:20 pm | Report abuse |
    • NIN

      Considering those Red state uneducated hillbillies feed your fat @$$ you had better feel something, or you could start growing your own food.

      July 17, 2012 at 3:26 pm | Report abuse |
    • volsocal

      If that's true, then you can't win. The liberals in Congress want you to pay dearly for global warming so they can have more money to buy votes with..

      July 17, 2012 at 3:34 pm | Report abuse |
  7. LotusGirl

    Andrea, those are great suggestions and I would just add that corn is most certainly not a natural diet for these animals! Let's take it a step further and get them back in the fields, grazing, as they were meant to be!

    July 17, 2012 at 3:21 pm | Report abuse |
  8. Woody

    There is always an excuse to raise prices even when we get our produce from other places around the world that are not in a drought and South Carolina has plenty of rain .

    July 17, 2012 at 3:22 pm | Report abuse |
  9. Mike Brown

    Climate change doesn't exist.....oh wait. Just wait until man made pollution problems start hammering you in the wallet on food prices. Can you say food riots and anarchy?

    July 17, 2012 at 3:23 pm | Report abuse |
  10. LotusGirl

    Andrea, those are great suggestions and I would just add that corn is most certainly not a natural diet for these animals! Let's take it a step further and get them back in the fields, grazing, as they were meant to be! And JG, ethynol is not environmentally/economically soud as we currently produce it, but it could be!

    July 17, 2012 at 3:25 pm | Report abuse |
  11. anita

    People never cease to amaze me! It doesn't matter WHO IS PRESIDENT, everyone blames all the negative outcome on the President! Really? And I guess you think Obama did a certain dance to create a drought! PLEASE! REALLY? Things cost more every time you enter a store. Gas started going down the latter part of June. By July 4th, it was steady flying higher and is still on the rise. WOW! We had maybe a 2 week break with gas prices declining. Now, nothing is different, but gas keeps going up. Everything keeps going up in price, everyday. I am on Social Security, a set income. Food, utilities, and housing continue to rise in cost. Luxuries like clothes, cars, and air conditioning are costing too much these days for a fixed income house. Look, for 2 years in a row, we did not recieve a cost of living raise. Everything was going up but not the income. I suggest everyone start fishing, hunting, and trawling for shrimp. Crabbing brings in good food as well. Everyone may have to sacrifice pork this winter until prices go back down but even if it wouldn't increase, pork and many other meat items are untouchable in price at present. They question why this is the worst country for obesity. It is cheaper to eat out than it is to cook these days. Yes, the fast food is unhealthy but the fact remains, I can go to McDonalds and get a double cheeseburger for one dollar. A pound of ground beef is costing over 3 dollars a pound. The food is far from healthy, but it fills a hungry tummy.

    July 17, 2012 at 3:25 pm | Report abuse |
    • NIN

      Well your first mistake was to rely on SS for all your retirement needs in the first place.

      You still have a house payment in your retirement years? 2nd mistake.

      July 17, 2012 at 3:31 pm | Report abuse |
  12. Woody

    Why is it even Egypt can grow produce but we seem to not be able to in a drought ? Maybe we in the U.S. need to put away the bibles and learn to get a little more inventive for when disaster strikes .

    July 17, 2012 at 3:26 pm | Report abuse |
    • senzeiszgone

      Blaming the bible seriously?

      July 17, 2012 at 3:36 pm | Report abuse |
    • Accurate

      You do know that the crops are planted on the banks of the Nile, right? And what is the Nile? A river. Duh.

      July 17, 2012 at 3:40 pm | Report abuse |
  13. Muh Fugga

    "We are heading for the sun...We are."

    July 17, 2012 at 3:27 pm | Report abuse |
  14. Rightster

    Maybe we can import food from China!

    July 17, 2012 at 3:27 pm | Report abuse |
  15. Preacher Bob

    This is Richard Nixon's fault.

    July 17, 2012 at 3:30 pm | Report abuse |
    • Niki

      That's thee dumbest comment ever!!!

      July 17, 2012 at 3:31 pm | Report abuse |
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