Economist: Drought A Short-Term Issue...For Now

As the headlines blare about the ravages of the drought, there is a tendency to get caught up in the frenzy and assume that life in the farm belt will be altered forever. The fact is that farmers are accustomed to the vagaries of Mother Nature, and they adjust.

Last year was the year that floods were going to destroy the farm, and this year it is drought. The corn crop is a loss this year, and soybeans may be next. However, the bean crop is perking up in those areas where there has been some rain. The next big question is whether there will be continued drought in the winter months. That is much more threatening than a summer drought as, in many respects, the drought this year was triggered by the lack of snowpack from last year. Right now this is a bad year, but it came top of several good years, meaning many farmers are prepared to survive it. Another year or two of this, and the situation worsens drastically.

Analysis: The long-term response has yet to set in. The prices paid for cropland have continued to escalate. There is confidence that this land will return to productivity, and nobody doubts that there will be demand for that output. There will be winners this year due to the drought. Those with irrigated fields will reap a substantial reward despite the additional costs of water. The companies that put in these systems have never had so much work. Those who have planted crops that are drought resistant are happy with their decisions. There also are the countries that can expect to ship far more to the US than in the past. All eyes are now on the winter forecasts, which are mixed thus far. At this point the East Coast is expected to be snowy and colder, while the South is expected to be wetter. The really bad news is that the Midwest if forecast to experience drought conditions continuing and/or worsening -- That would set the table for a miserable 2013.

-Chris Kuehl, PhD, NACM economist

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