The US drought

Summer drought may clobber the Midwest

Commentary: ‘Disaster’ for farmers and ranchers, commodities spike seen

Marketwatch,

8 March, 2013

An Illinois farmer last July looks over a pond used to water the cattle on his farm. He dug the pond deeper after it began to dry up during that drought.

Did you think last summer was dry? It’s going to get worse.

On the heels of the worst U.S. drought since the 1950s, long-range weather forecasts are showing that not only will the drought continue, it will intensify.

Consequences could be disastrous for farming and ranching communities across the Midwest — and lead to another spike in commodities prices should yields again suffer. Read “How droughts will reshape the United States” on The Washington Post.

The U.S. economy is still only starting to process last year’s drought. On the consumer side, recent government reports confirm that food prices have just begun to rise due to last year’s drought that — at its peak last September — covered nearly two-thirds of the country. Though hot weather and lack of rain caused futures prices for corn and soy to peak at new record highs last August, a lag in the country’s agroprocessing system means consumers — and therefore the broader economy — won’t feel the full brunt of higher supermarket prices for meat, dairy, and grains until later this year. Read USDA report on the 2012 drought.

When combined with sequester-led austerity, the additional pressure of sharply higher food prices (rising at double the inflation rate) could put a strain on the economy in 2013.

Stock prices of ethanol producers (Archer Daniels Midland Co. ADM -0.09%  and Green Plains Renewable Energy Inc. GPRE +2.33%  ), dairy producers (like Dean Foods Co. DF +3.24%  ) and meat producers (like Tyson Foods Inc. TSN +0.97%  , Smithfield Foods Inc. SFD +4.50%  , and Pilgrim’s Pride PPC -2.02%  ) may be impacted.

With the addition of new seasonal climate forecasts for March, there is significant cause for worry in the plains states where drought could even intensify beyond 2012 levels. See related slideshow: Drought could wreak havoc on grain forecasts.

Why you should worry

Drought in the United States (well, anywhere on Earth for that matter) is driven primarily by three things these days: current conditions (including soil moisture, snowpack, and current vegetation health), climate variability (whims of atmospheric and oceanic circulation that change month to month), and climate change (which in addition to rising temperature and evaporation rates tends to favor more extreme episodes of rains and dry spells).

Right now, all three of those point in the direction of another severe drought year in 2013.

First, let’s look at the current conditions:

As skiers may have noticed, snowpack in California and Colorado is between 65-79% of normal right now, one of the worst western snow seasons in recent memory. In agricultural terms, what that means is rivers feeding major agricultural zones will start out with a big strike against them. See SNOTEL snow water content map.

Also, despite a spate of recent midwestern blizzards, this winter’s precipitation across the vast majority of the country has only just kept up to normal levels or has fallen even further behind. Only tiny bits of Wisconsin, Michigan, and Ohio have managed to break their hold on last year’s drought. Current soil moisture conditions show a map full of red -- with dry conditions lingering over from last year.