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USDA Drought Monitor map depicts dry conditions from protracted lack of rain across much of the nation.

DROUGHT CRISIS: Ag Prices Rise, Production Slows With Dry Weather

Food Shortages Could Affect Stock Market, Perhaps Presidential Election

July 15, 2012       Leave a Comment
By: Dave Rogers

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This year's dry agricultural conditions are being compared to the Dust Bowl of 1936 when wind stripped bone dry soil from the land, farmers went broke and the Depression accelerated.

The gravity of the 1936 weather-induced disaster was portrayed in the movie "The Grapes of Wrath," based on a John Steinbeck novel.

The U.S. Department of Agriculture's Drought Monitor, released last Thursday, shows a parched midsection of the nation with little relief in sight.

The Weather Channel reported today: "61 percent of the contiguous U.S. continues to be tested by a hot, dry summer. Drought covers parts of 42 states. Coupled with building heat, drought conditions may continue to deteriorate as we head toward what is, climatologically speaking, the hottest time of the year."

Most of Michigan, Wisconsin and Minnesota appear to be the least affected by the lack of rain.

Agriculture Secretary Tom Vilsack announced that 996 counties in 29 states will be designated as natural disaster areas because of the drought, including four counties in northwest Ohio.

Farmers qualifying are eligible for low interest emergency loans from USDA?s Farm Service Agency. An estimated 36 percent of Ohio?s corn and soybeans are rated as poor or very poor condition, the Ohio Department of Agriculture said.

Crops, especially corn, are nearly wiped out in some states and some cattle ranchers are liquidating their herds because of parched fields.

Commodity prices are skyrocketing and the price of food is expected to rise dramatically, with consequences for every economic area including the stock market and perhaps even the Presidential election.

The USDA is scaling back forecasts, comparing this year's crop conditions to those of 1988. Some commentators say the calamity of 1936 is a more apt comparison.

A late summer or fall food crisis impelled downturn could turn public opinion in favor of the Republican Presidential nominee, Willard "Mitt" Romney, some political observers theorized.

"Certainly more bad economic news will not help President Obama's campaign, even though there is little any in government can do to change Mother Nature," one observer commented.

Drought is severe or extreme in most of the Midwest, according to the updated map.

The Dayton Daily News reported meteorologists "are concerned that new and frequent waves of heat will further stress crops over Iowa, Illinois and Nebraska into mid-August, while some rainfall opportunities may boost later-season crops over part of the Ohio Valley and around the Great Lakes."

Stressed corn and soybeans impacted by drought affect half the Corn Belt from Nebraska to Ohio, according to agricultural analysts.

The USDA recently warned that this year's corn crop would be diminished 12 percent below lukewarm May forecasts, and that short supplies and high prices are likely to continue through the fall harvest and perhaps even into next year.

Corn prices fell last week after the USDA forecast that demand for corn would be hurt by high prices. Chicago Board of Trade new-crop corn's December contract rose 28 cents per bushel to $7.32.

Along with corn, wheat and soybeans are in a vast number of products?everything from bread to vitamins to cooking oil. "Corn is one of the single most important inputs to retail foods," the USDA's Ricky Volpe says. "Corn affects almost 75 percent of the goods available in the supermarket."

November soybeans rose 6 cents per bushel to $15.29.

Arlan Suderman of Farm Futures magazine told the Des Moines Register that high corn and soybean prices, which have risen as much as 45 percent since early June, are a function of the rationing of the market.

If widespread rain comes soon, it could scale back the drought disaster to one of the worst harvests in the past 10 years instead of a millennial event like 1936, Volpe indicated.

A smaller harvest of corn could translate into higher prices for everything from cereal to soda pop by this fall, U.S. News and World Report stated, calling the situation "unfortunate, especially since food prices had been slowing down in recent months."

Corn isn't just used for consumer food products, it's an essential component in animal feed. With drought conditions crimping corn harvests, prices have edged higher, adding an estimated $75 to $80 in production costs per head of cattle.

Farmers interviewed on Sunday morning television farm shows were considering whether it was more cost efficient to send cattle, hogs, and chickens to the slaughterhouse instead of spending high dollars for water and feed to keep them in good condition.

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Dave Rogers

Dave Rogers is a former editorial writer for the Bay City Times and a widely read,
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