Summer drought may clobber the Midwest
Commentary: ‘Disaster’ for farmers and ranchers, commodities spike seen
new
March 8, 2013, 8:01 a.m. EST
By Eric Holthaus
Getty Images
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.
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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
+0.28%
and Green Plains Renewable Energy Inc.
GPRE
+7.17%
), dairy producers (like Dean Foods Co.
DF
+3.16%
) and meat producers (like Tyson Foods Inc.
TSN
+0.93%
, Smithfield Foods Inc.
SFD
+4.44%
, and Pilgrim’s Pride
PPC
+0.22%
) 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.
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Taking a look ahead using the newly released climate forecasts for
March, the next few months of rainfall look increasingly meager. See map.
The current consensus four-month forecast to June 2013 shows dry
conditions inching eastward into the Ohio Valley from the Great Plains.
Two months later, at least one model shows most of the country east of
the Rockies mired in a deeply dry period, enough to intensify drought
conditions to a point possibly exceeding 2012 levels. See map.
These forecasts factor in all sorts of information about atmospheric and
ocean circulations, and are generally the best tools that exist for
long-range outlooks.
One additional factor — a surprise La Nina — may also be in the cards,
which scientists have historically tied to increased odds of drought in
the United States. Predictability for La Nina is near its cycle lows
right now, but it’s still a point worth watching. See International Research Institute for Climate and Society charts about La Nina.
To top it all off, climate change shows no signs of releasing its stranglehold on the country’s weather in 2013.
Temperatures are forecasted to be warmer than normal every month as far
out as our forecasts go — until at least May 2014. For this year’s
critical summer months, the latest forecast shows above normal
temperatures from Medford, Ore. to Miami, and from Death Valley to
Downeast Maine. Corn basically shuts off its growth cycle above
temperatures of 95F. So, if the lack of moisture won’t depress yields,
the heat might. Drought also makes high temperatures more likely -- dry
air warms quicker than moist air -- which in turn makes drought more
likely. A vicious cycle that increases the odds for a drought repeat
this year. See National Weather Service summer forecast chart.
As a meteorologist, I try to find patterns in the data. In my work
advising agricultural and livestock interests worldwide, I heard many
stories last year about how forage for cattle was unavailable (for
nearly any price) across big stretches of the Midwest.
The impact of a repeat drought (possibly the third year in a row for
parts of Texas and Oklahoma) would place an exponentially greater amount
of stress on livestock in areas where herd sizes have already been
reduced simply due to lack of available feed. Even if rains were to
return to normal for the coming few years, it would still take ranchers
years to rebuild their herds from the harsh impact of the 2012 drought
alone. A repeat would amount to sucker-punching farmers while they’re
down. The patterns outlined above would be just that.
At least one state, South Dakota, is already openly fretting about what a
repeat of last year would do to tax revenues and the state’s economy.
During this fragile economic recovery, back-to-back disasters will have a
much, much greater impact. Read news story on drought impact on South Dakota.
However, there’s some cause for hope: last month, the USDA released
their annual outlook for the coming growing season, and forecasted
record or near-record production of corn and soy — two of the crops hit
hardest by last summer’s drought. Read Reuters story on USDA forecasts.
Their outlook says increased production will largely be driven by more
acres being planted as farmers scramble to take advantage of high
prices. Last year, the USDA took the rare step of allowing farmers to
produce hay on land semi-permanently enrolled in the Conservation
Reserve Program (which is designed to provide buffer land for wildlife
and ecosystem health) in a last-ditch effort to compensate for
drought-impacted low farm yields. Enrollment in that program is down
again this year as farmers trade environmental protection subsidies for
the chance to plant more corn and soy.
Looking at the latest seasonal climate forecasts for this summer, I
think the USDA is being overly optimistic in their 2013 yield forecast.
Their outlook seems to dismiss the chances for a repeat drought of
similar severity to last year.
It now looks like that could be just what we’re in for.
Meteorologist
Eric Holthaus
digs deeper into how weather and climate can affect markets for MarketWatch.
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