Thursday, September 6, 2012

What The Drought Of 2012 Tells Us About Industrial Agriculture

I grew up on farms in Iowa and Wisconsin, surrounded by a family of farmers and agricultural workers, all of whom grew corn. I have never heard any farmer say, “Wow, we got the perfect amount of rain this year.” It’s never perfect, and farming is a tough business. There have been droughts before, and it looks like there will certainly be more droughts in the future. However, the summer of 2012 has been historic in several ways:

● July was the all-time warmest month on record in the United States.
● Corn yields are predicted to be the lowest in 17 years.
● Corn futures touched a record high of $8.49 a bushel on August 10.
● July saw a 17-cent jump in the national average gasoline price--the biggest increase for that month on record.
● The United Nations Food and Agriculture Organization reported the largest monthly jump in its cereal price index, up 38 points (17%) from June and only 14 points below its all-time high registered in April 2008.

So what’s the difference between 2012 and other years of drought?

For one, this summer has seen record-breaking heat and dryness, especially in America’s breadbasket. The drought came at a particularly bad moment in the corn growing cycle, resulting in a crop that is likely to be diminished by around 23% this year. This decrease in supply of course increases demand, increasing the price of corn, which gets passed along to industries that use corn (mainly ethanol producers and livestock and dairy farmers). Along with retailers, affected farmers and manufacturers absorb as much of the price as possible before they must pass the cost along to consumers in an already struggling economy. (See projected prices in the graphic.)
A second major difference is the amount of corn we grow for ethanol these days. There is a huge debate over the current ethanol mandate that I aim (rather optimistically) to steer clear of in this post. But when a drought knocks out 23% of the harvest, that deficit has to come from somewhere. The current federal renewable-fuel standards require 13.2 billion gallons of corn ethanol to be blended with gasoline this year. That takes 4.7 billion bushels of corn. In a year where 10.7 billion bushels is an optimistic estimate for the total national corn crop, that means nearly 44% of this year’s corn harvest Read more + Additional infographics.

No comments:

Post a Comment