Climate change or not, weather is about to hit your wallet
The weather this year will have some impact on food prices and on your pocketbook.
The brown grass crunches underfoot. Grass that would normally be green in August, growing from fertile and normally wet soil has long since died. Almost anything can grow in the heavy black soil of the state, but rain is a required element. Very little rain has fallen since planting season began months ago. It was supposed to be a record year in the Corn Belt. Last year, Iowa alone produced nearly 2.4 billion bushels of corn from 92,000 farms and the number of cattle nearly equaled the human population of the state. The number of hogs outnumbered people nearly five to one.
All of those figures are facing threats this year due to the impact of blistering heat and enduring drought conditions. Most of the corn grown in Iowa does not end up on your table, at least not directly. The vast majority of it is used for animal feed and for ethanol production. With the crop under stress this year, consumers can expect higher prices for everything from steaks to gasoline. Farmers not able to afford feed have already begun liquidating their herds and corn futures pricing has surged this summer. A drought-created shortage turns a necessary, bread-and-butter commodity into a hot commodity for investors and a potentially expensive one for consumers.
An August 2 article by William Pesek in the Bloomberg News declared that the surge in corn prices is more of a hazard to the global economy than the European debt crisis. Not only is demand for food surging, uncertain weather is creating an unstable and uncertain supply. Pesek went on to suggest that investment in infrastructure and a change in government policies, including towards ethanol, could help to resolve the situation.
When corn spiked in price in 2010, due at least somewhat to greater consumption in ethanol production, farmers in Iowa and elsewhere simply planted more to increase production, bringing stability to the commodity and, ultimately, to food prices. The increase in prices this year, however, reveals possible cracks in the system. If the weather doesn’t cooperate, the impact of additional production is muted, thus placing additional stress on a growing and increasingly hungry world. Almost certainly, the drought of 2012 will place additional stress on your wallet to some degree, perhaps not tomorrow but certainly by next year.
As for prices, while consumers may see little change in the price of products such as cereal, milk prices will likely be headed upwards as the corn used to feed the dairy cows increases in cost. Ironically, the price of beef, chicken and pork could actually see a temporary decline in the latter part of this year as a surplus could grow if farmers thin their herds due to high feed prices. That decrease, if any, would be short-lived and prices could quickly and dramatically increase as supply then decreases.
And it is not just the United States, nor only American products that are headed towards higher prices. Sugar futures are also surging due to a drought in India. Some estimates have indicated that up to 50 percent of India is in a drought, reducing a normal surplus of the commodity by nearly a third. India and Brazil are the two primary exporters of sugar. Droughts in India have historically been closely correlated with El Niño, a cyclical condition in the Pacific Ocean with a wide-ranging impact on global and regional weather. El Niño conditions are expected to arrive in the coming months.
A quick glance at Iowa’s cornfields shows tall and mature stalks well ahead of last year in terms of growth. A deeper look, however, reveals the damage to the crop, amidst the green is an abundance of brown coming from the dry cracked soil. More than a week ago, a half-inch of rain fell across much of the Corn Belt. Some farmers considered it a blessing for the soybean crop, but too little, too late for corn.
“The rain received last week was very welcomed, but much more is needed to stop the further deterioration of both the corn and soybean crops,” said Bill Northey, Iowa Secretary of Agriculture. “The hot and dry weather continue to present challenges for livestock farmers as they move animals off pasture and use hay and other feed they had anticipated using over the winter months.”
According to the U.S. Drought Monitor from the University of Nebraska, much of the nation’s midsection is experiencing a severe to exceptional drought. Under such conditions in the nation’s prime agricultural states, an increase in food prices would seem inevitable, although the degree of which remains to be seen. What also remains to be seen is if the weather conditions this year are a harbinger of things to come. Last week Dr. James Hansen of Columbia University and NASA’s Goddard Institute for Space Studies told the Associated Press that the weather phenomena of recent years are so rare, yet now so frequent that they can’t be anything but man-made global warming. Hansen is a long-time scientist and an activist on climate issues. In 1988, the testimony he gave to Congress is considered the beginning of public awareness of global warming. He went on to say what is happening now is neither random nor normal, but is simple and accelerating climate change.
What is nearly certain is that Hansen’s latest study will not quell the highly politicized debate on the causes or even the existence of climate change. What is uncertain is how agriculture around the world can adapt to possible future fluctuations in regional weather patterns. As 2012 is revealing, planting more acres of corn is of lesser value if there is no rain to make it grow. Indeed, if change is here to stay, agriculture will find ways to adapt, but that could take time.
What is also nearly certain is that the weather this year will have some impact on food prices and on your pocketbook. For farmers looking out at brown stalks of corn, the impact has already been felt. Come winter, the rest of the world will know just how expensive this year’s drought will be.