We are just at the front end of feeling the impacts of the drought. The harvest season has yet to unfold across much of the U.S., the final tally of lost crops is not yet in, and drought conditions persist in much of the country. The most recent USDA weekly crop progress report is not promising: 50 percent of the corn crop and 39 percent of soybean is in poor or very poor shape. The sorghum crop has also been hit hard with 45 percent in poor or very poor shape.
Higher corn prices are also negatively affecting the livestock industry since corn is major source of feed. The price of hay has also doubled in some areas. Additionally, the drought has left 59 percent of pasture and rangeland land in poor or very poor condition. Many cattle farmers are culling their herds. This short-term response may lead to a temporary glut in the meat market but that will taper off within months. Over the longer term, into next year, we can expect rising meat and poultry prices, reflecting the increased cost of feed and smaller herds.