Severe Drought in Midwest U.S. adding to Economic Woes

At least 39 percent of cropland in the Midwest was under a severe drought during the summer of 2012, says Time magazine in the August 6, 2012 story of When the Rains Stop. And according to the USDA, only 26 percent of the corn crop is currently rated good or excellent – with 45 percent being rated as very poor. And because Farmers originally expected a record harvest this year –they had planted more corn this year than since 1937. As a result, the serious crop losses have caused corn prices to raise from last years 7 dollars a bushel to this years 8.24 a bushel.

However, because 85 percent of all planted acres in the United States are under some form of crop disaster insurance, taxpayers can expect to be placed with even more tax burden. Bruce Babcock, an agricultural economist at Iowa State University believes that because the Federal Government subsidizes much of private insurance, taxpayers will end up under the squeeze because “Crop-insurance companies are not going to be able to take on these losses.”

But the problem is only starting to take shape with concerns in Ethanol prices, and other nations who depend on food from America’s breadbasket. And because many livestock farmers depend on grain to feed their animals, the high cost of feed is gouging them too. As a result, “The cost of everything from hamburgers to cereals to Gatorade could go higher,” Time notes. “Drought will eventually deliver an unwelcome jolt to the struggling economy as it kicks inflation up a notch.”

The restaurant industry may also face hardships, where higher priced food may cause people to not eat out as much. Still, most Americans are fairly well insulated from increases in crop prices. Mostly because out of every dollar spent on food, only 15 percent actually goes to food. The rest is spent on packaging and advertising.

Please see the US Drought Monitor for more details.

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3 Responses to Severe Drought in Midwest U.S. adding to Economic Woes

  1. spinoza1111 says:

    …so the question becomes, what’s better? A state by state response with due respect to the Tenth Amendment, or a Federal response modeled on Franklin Delano Roosevelt’s New Deal, including its response to the ecological disaster of the Dust Bowl and the collapse of food prices?

    I think the answer is obvious. The response to the drought like my response to my own diagnosis (stage IV cancer) cannot be a variety of hypotheses and ad-hoc measures which might work. Nor can it be “Jesus” and “God” who are, considered as personal beings, notably unresponsive to the pain of innocent children and as a result can be expected to not answer any of my prayers, probably because they do not exist in the form imagined by simple folk. Sorry, but there it is.

    Any more than I can trust in mega-doses of Vitamin C merely because Linus Pauling, who won a Nobel but not in oncology, said that Vitamin C cures cancer, we need to avoid the crackpots who will be able to take over some state governments as they have in Florida (as witness the insanity of Florida’s governor refusing Federal funds that would create good jobs). I can sure take the vitamin C just as I can encourage free markets without believing that vitamin C, or the free market is a “panacea” as in cure-all. Perhaps there’s no cure for cancer only a form of life: perhaps there’s no cure for the awful economic and environmental disaster that’s unfolding except a form of life…which probably doesn’t include conservative politics. Sorry, but there it is.

    Just as I rely mostly on science whilst using healthy and holistic therapies (improved diet, exercise, reconciliation) that do no harm, the response to this killer drought, which is based on global warming based in turn on the burning of fossil fuels, needs to occur at the Federal level if not, in my opinion, at the world level (as in United Nations).

    Perhaps we can’t afford your precious Tenth Amendment. It got men killed in the Civil War. And responsible virtual historians usually point to the fact that in a situation of extreme “states’ rights”, states tend to coalesce into mini-federations at war with other mini-federations, such as “New England”, “MidAtlantic”, “The Old South” and so on.

    If boneheads in statehouses continue denying global warming there can only be, only a few years from now, wars over WATER posing as religious conflicts, such as are already occurring in Palestine, where the Jews are claiming Eretz Yisroel primarily to get the water that is needed for their lifestyle.

    And the death of the Union will be the death of the United States of America. You’re sowing the wind and you will reap the whirlwind.

    • carknow32 says:

      Please know that I am genuinely concerned for your fight with cancer. I’ll be praying for you to be encouraged, and strengthened – and I’m not just saying that either. Take care :)

  2. spinoza1111 says:

    Thanks! Your gracious hosting of my sometimes acerbic comments has always been refreshing.

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