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

Post by:
Filed under: Agriculture • Heat • Weather
soundoff (452 Responses)
  1. banasy©

    Yeah, okay.

    July 17, 2012 at 4:18 pm | Report abuse |
  2. Biff

    And someone tell me why the truckers will raise their prices and the stores will raise their prices to make up for a bad season but we are supposed to believe the farmer won't. If the farmer has a bad season then the bottom line is in the loss column and it's deductable. They won't be losing as much as you are led to believe...If I'm wrong please correct me.

    July 17, 2012 at 4:21 pm | Report abuse |
    • merritt

      you're not wrong as most farms are huge corporate farms run by the likes of Monsanto etal..

      July 17, 2012 at 9:38 pm | Report abuse |
    • crazyvermont

      As a person who has farmland, but not a farmer, you've raised a valid question but not all correct. If the farmer has crop insurance, he'll actually lose nothing; however, too many of these farmers(like any other citizens) have been spending like drunken sailors over the last 4-5 years when having record prices and don't even have money for the insurance. Write offs come nowhere near covering losses if they don't have that insurance. Food prices will definitely escalate and I believe considerable more the the 1% projected in this article and we may see food shortages

      July 18, 2012 at 8:47 am | Report abuse |
  3. Chris R

    You don't eat fresh produce? Really? Of course, the thing to keep in mind is that current prices are also set by the futures market. If the futures of things like corn are higher you'll pay more now for it.

    July 17, 2012 at 4:24 pm | Report abuse |
  4. Biff

    Chris.....who said they don't eat fresh vegetables?

    July 17, 2012 at 4:30 pm | Report abuse |
  5. NeverMindAboutClimateChange

    Maybe my tea buddoes will get a clue about global warming when a loaf of bread is $20.

    July 17, 2012 at 4:45 pm | Report abuse |
  6. barbarianofgor

    Where are the AG subsidies, then?
    The Subsidies to move food in from overseas?
    The flood of illegal labor?

    The system we set up a 5 year drought shouldn't mean 5cents on the dollar.

    Where's all that money going to the rich elite we TRUST so much!?

    Doubtless to the fund to be drained for the 25th yacht, then?

    July 17, 2012 at 4:50 pm | Report abuse |
  7. Tahir

    The blood of Iraqi and Afghan people has brought drought is USA.The revenge of the GOD has begun

    July 17, 2012 at 4:51 pm | Report abuse |
    • vet4life63

      Go have some Barbecue pork. It'll make you think straighter, better than hoping to die for your 50 virgins in heaven.

      July 17, 2012 at 5:13 pm | Report abuse |
    • John

      Very good, from the people of the desert. LOL!!!!

      July 17, 2012 at 5:28 pm | Report abuse |
    • ladyfonseca

      And what was the cause of the drought in 1956? And what causes the droughts in Iraq and Afghanistan and pretty much all over the world? I'll tell you it called cyclical weather you moron.

      July 17, 2012 at 5:33 pm | Report abuse |
  8. gmansback

    More importantly, how will this affect the price of bourbon?

    July 17, 2012 at 4:51 pm | Report abuse |
    • Pete

      Jim Beam already jumped a full $5.00 a bottle at the Walmart and Safeway here.

      July 17, 2012 at 4:53 pm | Report abuse |
  9. Pete

    Better start hoarding drinking water.

    July 17, 2012 at 4:51 pm | Report abuse |
  10. jim

    The fourth angel poured out his bowl on the sun, and the sun was given power to scorch people with fire.

    Revelation 16:8

    July 17, 2012 at 4:55 pm | Report abuse |
  11. jim

    gay 0bama the anti-Christ and gay Bush the False Prophet.

    Times up gay 0bama July 2012..

    "The Beast"-->gay 0bama....

    "Men worshiped the dragon, for he had given his authority to the beast [see Emperor], and they worshiped the beast, saying, "Who is like the beast, and who can fight against it?" And the beast was given a mouth uttering haughty and blasphemous words, and it was allowed to exercise authority for forty-two months; it opened its mouth to utter blasphemies against God, blaspheming His Name and His dwelling, that is, those who dwell in heaven. Also it was allowed to make war on the saints and to conquer them. And authority was given it over every tribe and people and tongue and nation, and all who dwell on earth will worship it, every one whose name has not been written before the foundation of the world in the book of life of the Lamb that was slain." (Revelation 13:4-8 RSV)

    (Revelation 13:4-8 RSV)

    42 months-->Times up in July 2012

    July 17, 2012 at 4:56 pm | Report abuse |
  12. Outside Observer

    Following the White House logic of late, because President Obama is in charge of the nation, this drought and the higher food prices we will have to pay are clearly Obama's fault and stem from his failed policies on global warming....

    July 17, 2012 at 4:57 pm | Report abuse |
    • DYWLF

      The high food prices are a result of the glut of food stamps on the market. A signature mark of the obamanation. So yes, the obamanation did cause the high food prices!

      July 17, 2012 at 5:33 pm | Report abuse |
    • jony3322

      I thought GOP not believe in global warming. GOP always attack any one talking about global warming.

      July 17, 2012 at 8:19 pm | Report abuse |
  13. longtooth

    Let the free market reign. We don't need government money! That comes from taxes, and taxes are evil! Let's all be pure capitalists until we all starve!

    July 17, 2012 at 5:00 pm | Report abuse |
  14. susu

    With the drought hitting corn sup;plies (among other things), maybe people who consume alot of sugary products (i.e. corn syrup, etc.) will cut back on the stuff (pop, you name it) and lose a little weight! Just trying to see the bright side of things with this whole drought biz......

    July 17, 2012 at 5:04 pm | Report abuse |
  15. SPLAT!~

    Heck, I thought it was a lack of rain!~

    July 17, 2012 at 5:04 pm | Report abuse |
    • Amir

      yes, this is all about rain

      July 17, 2012 at 5:12 pm | Report abuse |
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17