Free Essay

2012 Drought Economic Impact

In:

Submitted By holly1027
Words 1497
Pages 6
Graduate Finance

29 August 2012

2012 Drought Economic Impact

The persistent heat and drought seem to be the only topic of discussion lately as the rain starved fields beg for some watery relief. Increasing food prices and fuel costs will soon be joining the ever important conversation as the worst drought in 50 years persists, thus having a very negative impact on the already sluggish economy. In my paper, I will discuss some of the economic impact the drought is having on consumers, farmers and ranchers; also what actions the Obama administration will take in order to ease fears for all those involved.

The drought has hit corn especially hard during the ever important pollination process thus causing the growing cycle to be very much disrupted. However soybeans which mature later in the season should be better off than corn, although prices are expected to increase for both. Futures prices for corn have increased 60 percent, wheat is up to 41percent and soybeans have risen 24 percent (Lempert).Corn is the biggest U.S. crop, valued at $76.5 billion in 2011, followed by soybeans at $35.8 billion, according to the National Agricultural Statistics Service (Lempert).

It is crisis such as this which reminds the consumers how important and fragile American’s farming industry is. In fact about 60 percent of U.S. farmland and more than one half of American counties have been affected by the drought and are currently designated drought disaster areas (Lempert). Programs such as Federal Crop Insurance Program and Emergency Conservation Program will ensure a speedy recovery and stabilize prices. It is important to have a strong farm safety net in order to sustain the success of American agriculture. In fact the USDA has expanded the availability of farm credit, helping struggling farmers refinance loans. Unfortunately, there are a few smaller family run farms that will not qualify for the relief the program offers and have to shut down (Lempert). The real reason is because they are simply too small to qualify for all the loans that might be available to the larger farms. However, there may be assistance through other local programs such as banks extending lines of credit should the situation arise..

Farmers will need to use their crop insurance to offset some of their losses; it is unfortunate that this type of insurance is unavailable to livestock producers. Later in my discussion I will elucidate about some of the available assistance the federal government is offering. Many are forced to thin their herds to raise income and lower costs from high-priced feed (Bjerga). Government-subsidized insurance payments will cover 85 percent of anticipated revenue, helping crop producers through this year.

Crop subsidies may rise 6.3 percent this year to $11.1 billion (Bjerga). Assuming that the benefits will continue beyond Sept. 30 when the current farm bill expires. The Senate and the House Agriculture Committee have approved bills that would eliminate about $5 billion in annual subsidies paid directly to farmers while boosting other support programs by smaller amounts (Bjerga).

This drought is similar to a domino effect because the pattern by which this drought is affecting food prices is consumers will see the price of corn go up, driving up the price of feed, and in turn the price of animals that go to slaughter or animal products. However, on a more longer term down the road into 2013 possibly into 2014, consumers will observe higher corn and soybean prices built into packaged, processed, more shelf stable foods (Staff). Examples would include cereals, bakery products and other foods with grain; will likely see above average inflation. However, one bright spot for consumers is that inflation for fruits and vegetables are expected to stay normal, at 2% to 3%. And, though higher corn and soybean prices may not immediately affect meat and processed foods, effects may be felt well into 2014 (Staff). So the question is how much more will consumers pay on average for food in the coming months and year? According to Michael Feroli, chief economist at J.P. Morgan Bank, food prices will increase an average 4 percent annual rate in the nine months ending June 2013, up from the current 1.5 percent (Chandra). This may result in a decrease in disposable income by 0.3 percent from the fourth quarter of 2012 through the first half of next year and reduce spending by a similar amount, as well (Chandra). Sweltering temperatures along with drought-charred land and soaring feed prices has left little grass to feed the several herds of hungry cattle. With congress on a five-week break without agreeing on aid to help ranchers through one of the worst droughts in the nation's history, this season could prove devastating for the already struggling cattle industry. What this means is it will be September before any ranchers can even hope for disaster aid legislation hopefully that includes cash to buy feed until they would normally send their cattle to feedlots or slaughter in the fall or winter. This situation is a difficult one as several anxious ranchers are out of feed and money, have been selling off animals for months in effort to thin their herds. But ranchers are in a particularly precarious position because most don't have access to federally subsidized insurance programs that cover crops like corn and soybeans (Beck). Recently, the White House announced the federal government will buy up to $170 million worth of pork and other meat for food assistance programs to help drought-stricken farmers. In an effort to bolster prices the Defense Department is encouraging its vendors to speed up meat purchases in an effort to offset an expected overabundance on the market in the next few months (Beck). Because of the excesses hitting the market and grocery stores this fall farmers are expecting to get only a fraction of what their animals are worth. The prices will be dropping briefly and then rising early next year. It is a very unfortunate situation as farmers are expected to sell their animals for the price that is presented to them and their really is no room for negotiation. In spite of the administration offering low-interest emergency loans, opening federal land for grazing and distributing $30 million to get water to livestock; ranchers are still having a very difficult time. The emergency loans are complicated and aren't available to everyone. Although they are grateful for the water, animals need to eat, and hay is in short supply. $383 million in disaster relief was approved by the House in the earlier part of August then Congress went home before the Senate acted on the bill. The Senate had previously passed a disaster aid package as part of a five-year farm bill, but GOP leaders in the House refused to bring that to a vote because many Republicans object to the nearly $80 billion included for the food stamp program (Beck). It is this uncertainty that is leaving livestock producers concerned as what to do for their herds. Some may take the chance and buy expensive feed hoping the federal government will help them pay the bill or perhaps should they sell their cattle at a loss wondering if they had held onto them a bit longer maybe they might have been eligible for aid (Beck)? It is also unclear how much money individual ranchers would receive even if Congress passed the House bill upon members' return. The estimated $383 million disaster relief package would be divvied up among eligible applicants after considering a number of factors. Depending upon where a person stands in this, they may be eligible for tens of thousands of dollars or possibly nothing at all. For some their decision will come too late as many ranchers have made arrangements knowing their losses are in the thousands of dollars already.

Works Cited Beck, Margery A. "Ranchers Lose Hope Drought Aid Will Come in Time." Yahoo! Weather. Yahoo! Weather, 19 Aug. 2012. Web. 29 Aug. 2012. . Bjerga, Alan. "U.S. Farm Income Seen Rising as Drought Spurs Higher Prices." Http://www.businessweek.com. Http://www.businessweek.com, 28 Aug. 2012. Web. 28 Aug. 2012. Chandra, Shobhana, and Sandrine Rastello. "Drought-Driven Food Costs May Damp Consumer Sentiment." Bloomberg Businessweek. Bloomberg Businessweek, 27 Aug. 2012. Web. 28 Aug. 2012. Compiled by Staff. "Retail Food Prices Should Stay Steady in 2012." Http://farmfutures.com/story.aspx/retail-food-prices-should-stay-steady-2012-17-62826. Http://farmfutures.com/story.aspx/retail-food-prices-should-stay-steady-2012-17-62826, 28 Aug. 2012. Web. 29 Aug. 2012. Lempert, Phil. "Historic 2012 Drought - The Food, Nutrition, & Science Newsletter with Phil Lempert! - Providing the Latest Information about Food Nutrition, Science, Technologies, News and Trends." Historic 2012 Drought - The Food, Nutrition, & Science Newsletter with Phil Lempert! - Providing the Latest Information about Food Nutrition, Science, Technologies, News and Trends. Http://www.foodnutritionscience.com/, 27 Aug. 2012. Web. 29 Aug. 2012. .

Similar Documents

Free Essay

Moroccan Drought

...Moroccan Drought It won’t rain. Their hopes for a rainy season have faded away. Crops have died and livestock are starving. Even if it rains now, it will not make much of a difference. The country of Morocco has been experiencing severe drought for several decades now. The drought has considerable negative impacts on the economy and people of Morocco in terms of crop production losses, reduction in GDP, and loss of livelihood. The drought has also demonstrated itself as a major obstacle for agriculture and food security in the country. Morocco, whose economy depends largely on agricultural production, is greatly threatened by the drought. Agriculture is Morocco’s main economic activity, contributing almost half to the country’s GDP. With several indications suggesting the drought is not close to an end, wouldn’t it be crucial for policymakers to take hold of the implications of the droughts, especially for the most vulnerable in society, such as the poor, small-scale farmers, and the poorer urban households? In the article “Climate change, vulnerability and adaptability in North Africa with a focus on Morocco” (Janpeter, Korbinian, Elke, Jürgen, 2012), studied the environmental impacts of climate change to major economic and agricultural developments in North America. The article openly states that climate change will likely have the strongest effect on Morocco. The combination of decreasing supply and strong population growth aggravates the stressed water situation in the...

Words: 855 - Pages: 4

Free Essay

Over 10 Years of Drought in the First Decade of the Millennium Has Substantially Reduced Water Flows in the Murray River. the Survival of Sensitive Environmental Ecosystems Was Threatened and Substantial Economic Losses

...A drought can be described as being an ecosystem disturbance meteorologically, however hydro logically it’s portrayal misleading (Bond, Lake & Arthington 2008). A universal definition for a drought is not known but a meteorological drought can be defined as a lack of rainfall for an extended period of time whether it is several years or a season relative to the arithmetic mean for that region (Bond, Lake & Arthington 2008). As a drought is able to have a substantial impact on the natural marine ecosystems, the outcomes that come with it are aggravated both by indirect and direct anthropogenic adjustments to hydro areas such as rivers and the catchments (Bond, Lake & Arthington 2008). Major impacts in rivers are generally the decline of the amount of water and habitation accessibility for the surrounding animals (Bond, Lake & Arthington 2008). Droughts are a frequently occurring matter in Australia with it being a regular element on the climate with most said to have had an affect by the El Nino phase (Bond, Lake & Arthington 2008). As a drought is classified as a natural hazard it’s able to cause a great amount of destruction socially and economically (Bond, Lake & Arthington 2008). The millennium drought is sought to be one of the biggest to leave an impact on the environment (Bond, Lake & Arthington 2008). The millennium drought has had a severe impact on most of the South-Eastern Australia region with most of the rivers undergoing a record low water capacity during this...

Words: 1976 - Pages: 8

Premium Essay

Assessment of Impacts of Climate Variability in Kilosa District, Morogoro Region in Tanzania

...Assessment of Impacts of climate variability in Kilosa District, Morogoro Region in Tanzania Scientist. Gerald Mrema. PRECS M&C LTD, P.O. Box 10268, Dar es Salaam, Tanzania *Corresponding Author (Tel: +255714254900 e-mail: mrema.gerald@gmail.com) Abstract This research is basically on assessment of impacts of climate variability in Kilosa District Morogoro Region in Tanzania were the field study was done within three wards that is Ulaya, Kilosa town and Rudewa represent three major zones of Kilosa District that is highlands, midlands and lowlands respectively. Methodologies that were used in field study include physical observation, consultation, interview through research question, literature review and GIS in map updating. Data from Tanzania meteorological agency (TMA), WAMI/RUVU basin and Morogoro agriculture department of rainfall and temperature, water level and water discharge also crop production respectively for 30years from 1980 to 2010 were analyzed statistically in order to show the link between climate variability with its associated impacts in both people and environment at large, results shows that climate variability in Kilosa District generally is of both dry and wet years in different years where the area also experience both MAM and OND seasons of rainfall per year. Also results have revealed that the total annual rainfall at Kilosa is observed to decreases at the rate of 8.04mm/year while in temperature there a slight increase at a rate of 0.1oC/year in temperature...

Words: 8286 - Pages: 34

Premium Essay

Disaster Management

...disasters. This has led to consequences like poverty and disease (World Risk Report 2013). The assertion that disasters in Africa occur when hazards and vulnerability meet is true. Disasters in Africa tend to affect the vulnerable. Natural disasters occurring in African countries undermine the economic survival of poor communities. Many populations in countries throughout the continent have suffered under the impact of such hazards, which have killed thousands and caused injuries to many others. Mainly it is the vulnerable groups of people and their locations that are exposed to risk of these disasters. It is of paramount importance to note that these disasters can be natural or man-made. It is the scope of this paper to deliberate if disasters in Africa really occur when hazards and vulnerability meet or not. Increasing disaster threats not only reflect the onset of events such as earthquakes or floods, but also the changing demographic and socioeconomic characteristics of the population. A large, violent tornado, for instance, passing through an open field presents little danger. On the other hand, a relatively weak tornado can pose significant risks to human life and can result in great economic losses in densely populated areas. While the intensity is important, of equal or greater importance is the presence of a population whose demographic or socioeconomic characteristics may place its members at greater risk of harm before, during, and after a disaster. Natural disasters frequently...

Words: 3436 - Pages: 14

Premium Essay

Negative Effects Of Climate Change

...The country’s low level of economic development combined with its heavy dependence on agriculture and high population growth rate make the country particularly susceptible to the adverse effects of climate change. Negative impacts of climate change on crop and livestock production could result in a nationwide food shortage and greatly hinder the economy. Adaptation is widely recognized as a fundamental component of any policy response to climate change and variability. Studies show that without adaptation, climate change is generally harmful to the entire livelihood system, but with adaptation, vulnerability can largely be reduced (Smith, 1996). ‘The extent to which an agricultural system is affected by climate change and variability depends on its adaptive capacity, which is the ability of a system to adjust to climate change and variability...

Words: 1153 - Pages: 5

Premium Essay

Disaster Risk Management In Namibia

...be the best economic methods to use and how they can be applied to value the resource/problem. Disaster Risk Management (Floods and Drought) in the Cuvelai-Etosha Basin “THE IMPACT OF FLOOD/DROUGHT IN THE CUVELAI-ETOSHA BASIN NORTHEN PART OF NAMIBIA” Introduction Namibia is one of the driest country in the sub-Sahara Africa and most affected by drought and flooding. Around the globe about 3 billion people are living along coastal lines and in flood plains that makes them vulnerable to natural disasters such as floods and hurricanes (FERERENCE). One of the most flood prone areas in Namibia is the Cuvelai-Etosha Basin (CEB) in the North Central...

Words: 1388 - Pages: 6

Premium Essay

Bẳng Doanh Thu Của Syngenta

...2012 Half Year Results Basel: July 26, 2012 Safe harbor This document contains forward-looking statements, which can be identified by terminology such as ‘expect’, ‘would’, ‘will’, ‘potential’, ‘plans’, ‘prospects’, ‘estimated’, ‘aiming’, ‘on track’ and similar expressions. Such statements may be subject to risks and uncertainties that could cause the actual results to differ materially from these statements. We refer you to Syngenta's publicly available filings with the U.S. Securities and Exchange Commission for information about these and other risks and uncertainties. Syngenta assumes no obligation to update forward-looking statements to reflect actual results, changed assumptions or other factors. This document does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer, to purchase or subscribe for any ordinary shares in Syngenta AG, or Syngenta ADSs, nor shall it form the basis of, or be relied on in connection with, any contract there for. 2 First half 2012 highlights ● Sales up 10% at constant exchange rates - strong volume growth in northern hemisphere season - targeted price increases achieved ● Europe: sales up 9% despite economic uncertainty, weather ● North America: sales up 24% reflecting portfolio strength - insect and weed resistance management - royalty income from distinctive trait technology ● EBITDA up 15% at constant exchange rates 3 First half 2012: integrated business update by...

Words: 1698 - Pages: 7

Premium Essay

Dust Bowl

...Date The Dust Bowl The Dust Bowl refers to the 1930 period when adverse storms resulted in socio-economic and ecological destruction to the Canadian and American economies. The disaster lasted for six years, from 1930 to 1936, but in some areas, it lasted till 1940. The extent of Dust Bowl’s impacts intensified in North America following the event’s concurrence with the Great American Depression. States affected by the weather adversities included the Canadian South, South Eastern region of Montana, South Western parts of North Dakota, and Texas, North Eastern regions of Wyoming, Colorado and New Mexico, and major regions of South Dakota, Nebraska, Kansas, and Oklahoma. The causative factors for the development of the Dust Bowl were attributed to two main factors; drought and famine condition in existing in Central America and poor farming methods on the vast dry lands from the Canadian prairies in the South to the US, acreage of over 400,000 km2 (Langston-George, 2015). Based on Dust Bowl’s historical naure, it is imperative to understand the causes, characteristics, impact and draw future lessons to mitigate such occurrences in the human and physical environment. Characteristics of the Dust Bowl The Dust bowl region lies on the west side of the 100th meridian. The elevation of the plains was estimated to be 760m on the east side and 1800m to the west. The erosion and drought affected a geographical coverage of about 100,000,000acres. The climatic condition of the area is...

Words: 3039 - Pages: 13

Free Essay

System Dynamics over the Murray Darling Basin

...with many high-value natural resources. The extensiveness of the wetlands support and maintain the health of the river system, which made the Murray Darling Basin the Australia’s most important agricultural area for both crop and livestock. As a result, the basin produces over one-third of Australia’s food supply. From above sentence, it seems that the area is enriched with healthy natural resources and ecosystem. However, during 2001 to 2009, the irrigation in this area has increased by a large number causing the low inflows in river systems. The low inflows including the climate change has resulted in the drought across the basin, followed by other environmental problems such as a degradation of biodiversity or an increase in salinity level of land and water, etc. Not only the environmental is destroyed but also the economic in the area which then causing the social impact. To resolve this issue, the government has established the Murray Darling Basin Authority (MDBA) in 2007 to address this problem and given a task to develop and implement a “Basin Plan”. However, for the current status, “The Proposed Basin Plan” has created the raging debate among the concerned stakeholders. This report will explain the issues from the beginning; the reason why Murray Darling Basin becomes an issue in the first place, as well as the key arguments for the issue. The Basin Plan The main element of the Basin Plan is to develop a long-term Sustainable Diversion Limits (SDLs), which defines...

Words: 1631 - Pages: 7

Premium Essay

Climate Change Is Global Sub-Saharan Africa

...as the leading human and environmental crises of the 21st century (Tadesse, 2010). Globally, it adversely affects livelihood activities through the occurrence of diverse extreme events such as floods, cyclones, droughts, and unpredictable rainfall patterns (Urama & Ozor, 2010). Changes in temperature and rainfall patterns affect agriculture, especially in tropical regions. Consequently, rain-fed agriculture is seriously threatened resulting in imminent global food insecurity Although the impacts of climate change is global, sub-Saharan Africa (SSA) is noted to be the region most vulnerable to many adverse effects of climate change because of her high dependence on rain-fed agriculture for food security, economic growth, coupled with low adaptive capacity (Kotir, 2011). In SSA, 93% of cultivated land is rain-fed (Sharma, 2011) and over 80% of the rural households derive their livelihoods from rain-fed agriculture (Gbetibouo & Mills, 2012) with about a third of the people in this region living in drought prone dry lands (Singh et al., 2009). Climate change has resulted in low crop productivity and crop...

Words: 386 - Pages: 2

Free Essay

Impact of Climate Change on Food Security

...Abstract Climate Change is a global problem that is creating regional impacts to food security. Climate studies require the analysis of vast pools of data that are more easily processed by filtering down to the micro-climates or sub-climates of particular regions. Many studies have been completed utilizing global climate observations in an attempt to model changes to regional food production zones. Private organizations or government grant making groups with an interest in how climate change will directly impact their particular food security have funded most of the research available on this topic. Much of the literature available indicates that economically secure countries are more equipped to handle the food security impacts of climate change and have dedicated fewer resources to studying this issue. Three regions that have completed significant climate studies in relation to food security are Eurasia, Sub-Saharan Africa (SSA) and Australia (to include the Pacific island nations). All three regions discuss the use of Genetically Modified Organisms (GMOs) to address their food security concerns. The Impact of Climate Change on Food Security Climate change presents a multitude of potentially dangerous issues for world communities to solve. Perhaps the largest of these issues is the impact of climate change on food security. T. Thamizhvanan and K. Balaguru (2012) indicate that food security has four dimensions: “availability, accessibility, food utilization,...

Words: 3026 - Pages: 13

Free Essay

African Health

...developed Eastern and Western countries and life expectancy is far less than that of developed countries (Health Poverty Action, 2015). Poverty and health worldwide are inextricably linked (Health Poverty Action, 2005). This assignment will be looking at those factors caused by poverty that lead to poor health. Poor sanitary conditions. Poor sanitary conditions in Africa have led to a lot of health problems leading to poor health conditions across the continent. In 2008, approximately sixty two percent of Africans did not have access to improved sanitation facilities such as proper toilets that separate human waste from human contact (WHO, 2008). In the rural parts of Africa, sanitary problems are particularly common especially in drought times when water is unavailable for domestic uses (Ademuluyi and Odugbesan, 2008: 812). Sanitation conditions worsen if clean water supply is low or unavailable. Many African countries suffer from this lack of clean water to use and waste disposal systems. Food shortages. Then there is food shortage in Africa which has left a lot of communities hungry and hopeless as most of them have deteriorated health and some lose their lives. Eighteen out of twenty three countries where starvation and malnutrition are most severe in the world are in Africa (James,...

Words: 4163 - Pages: 17

Premium Essay

Consumption

...,This report has been prepared as input to the 2012 World Water Week and its Special Focus on Water and Food Security. Feeding a Thirsty World Challenges and Opportunities for a Water and Food Secure Future RepORT 31 Copyright © 2012, Stockholm International Water Institute, SIWI ISBN: 978-91-978846-5-5 ISSN: 1404-2134 How to Cite: Jägerskog, A., Jønch Clausen, T. (eds.) 2012. Feeding a Thirsty World – Challenges and Opportunities for a Water and Food Secure Future. Report Nr. 31. SIWI, Stockholm. Cover photo: iStockphoto Design by Britt-Louise Andersson and Elin Ingblom, SIWI Printing by Elanders, Mölnlycke, Sweden. The printing process has been certified according to the Nordic Swan label for environmental quality. For electronic versions of this and other SIWI publications, visit www.siwi.org. Feeding a Thirsty World Challenges and Opportunities for a Water and Food Secure Future Note to the Reader Today, in 2012, nearly one billion people still suffer from hunger and malnourishment, in spite of the fact that food production has been steadily increasing on a per capita basis for decades. Producing food to feed everyone well, including the 2 billion additional people expected to populate the planet by mid-century, will place greater pressure on available water and land resources. This report provides input into the discussions at the 2012 World Water Week in Stockholm, which is held under the theme of Water and Food Security, and was edited by Anders Jägerskog...

Words: 19153 - Pages: 77

Free Essay

The Risk and Impacts of Climate (Weather) - Related Natural Disaster Such as Storm

...Global warming has become alarming recently. Over the past decades, research has been conducted on climate change and its impact and how it directly or indirectly influences the health and well being of the planet and its inhabitants. This essay will cover the risk and impacts of climate (weather) – related natural disasters such as storms, floods, droughts, rainfall and extreme temperature. Research over the past few decades has done much to clarify the evidence that global climate is changing and these changes are largely due to human influence. Intergovernmental Panel on Climate Change(IPCC),(2014) linked the risks of climate change to the increase in emission of greenhouse gas through human activities resulting from increased in population and economic growth. According to World Health Organization (WHO), (2014) the increase in human activities has impose dextra force on the climate system, most especially the burning of fossil fuels result in the emission of greenhouse gases and carbon dioxide. They accumulate and cause extra heat on the surface temperature, increasing the climate variability and influencing climate change.As the atmosphere accumulates energy, it yields to the increasing greenhouse gas concentration causing climate change and extreme weather that may lead to natural disasters; heatwaves, storms, cyclones, floods, and droughts. The impacts of climate and extreme weather on human activities are numerous ranging from agricultural to social to industrial production...

Words: 869 - Pages: 4

Free Essay

Management

...Collapse of the Hittite Empire Nowadays, there are a lot of theories and inferences that what caused the collapse of the civilization such as environmental, ecological, political, and economic etc. I am going to introduce and analyze of the Hittite civilization which belongs to the period of the Bronze Age. There are some aspects of the collapse of civilization people have defined. What is collapse exactly? As said by the article from the National Geographic, “Collapse has specific implication of ‘imploding’ under its own weight or mismanagement or something”. For instance, while the Spanish conquered the post-classic Maya, the classic Maya may have collapsed. Even then, to have a civilization conquered is not necessarily to have it end. Chris Thornton, moderator, said there’s no such a thing as a sudden collapse. People do not disappear, and they move and they change. Giorgio Buccellati said collapse can be defined as a broken tradition. More specifically, Archaeobotanist, Dorian Fuller, stated about little tradition such as folksongs, and huge traditions such as architecture of temple. “Little traditions are more likely to persist,” he said. “Big traditions, more likely to collapse.” In that frame, good parts of the culture can continue, and probably direct to the revival of the rest of it after a latency period. “But if it doesn’t come back, that’s collapse.” On the other hand, Richard Hansen said that even the rural populations are leaving in the case of the Maya (end...

Words: 1841 - Pages: 8