Brad Rippey, USDA Meteorologist
1. This is the nation’s worst agricultural drought since 1988. Now this is especially hitting the nation’s farm belt hard and if you look at the overall drought coverage for the lower 48 states, we now see more than half of the country in drought, but if you focus specifically on the U.S. corn and soybeans more than three-quarters are now considered to be in an area covered by drought. So the real focus has been across the central Plains and the Midwest.
2. We certainly have seen worse droughts in the past in the 1950s, the 1930s, not only in terms of aerial coverage, but in terms of the duration, this drought has only lasted a short time. We saw multi-year droughts in previous decades in the 50s and 30s.
3. La Nina, which is a cooling of the equatorial waters in the central Pacific is a drought maker for the Continental United States. It robs the subtropical jet stream of moisture and that was a big reason for the drought in Texas, and Oklahoma, and Kansas in 2011. Unfortunately, the conspiracy of La Nina along with some developments in the North Atlantic have led to a rapid expansion of drought in 2012.
4. Unfortunately, it looks like the dome of high pressure that has been dominating the continental United States will continue to park itself over the Plains and parts of the Midwest for at least the next two weeks. More than likely this will persist through the remainder of the 2012 crop season.
5. The best chance for relief will be due to El Nino. It looks like the waters are quickly warming across the Pacific and as we head into the Autumn, Winter, and then the Spring of 2013, if El Nino does indeed form, that could certainly lead to some relief especially across the southern half of the United States.
6. The real target for this drought has been corn and soybeans. If you look at the current numbers, mid-July numbers for crop conditions we see 38 percent of the U.S. corn and 30 percent of the soybeans currently rated in very poor to poor condition. That’s the highest numbers we’ve seen since 1988.
7. Currently 54 percent of range and pastureland rated very poor to poor and since USDA NASS has been keeping that type of statistic beginning in 1995, 54 percent is an all time record. The previous record had been 52 percent late in the Summer of 2002.
Joe Glauber, USDA Chief Economist
1. We lowered our projection for corn yields down to a 146 bushels per acre. If we get those yields that would still be the third largest crop on record, but since that time crop conditions have deteriorated further, so we’ll be waiting for that August crop production report when we’ll get some hard numbers on crop yields.
2. Food inflation has come down over the last several months the numbers that just came out yesterday suggested food inflation for food purchased at home were up about two point six percent over last year. Again, that’s a little higher than the overall inflation rate but still in the range for what we’ve seen for food inflation over the last fifteen years. That said, we could see some increases. We’re still forecasting our current forecasts for food inflation this year in the two and a half to three and a half percent range. We’ll update these as this goes on.
3. The overall farm value of food is pretty low as far as the retail food dollar, accounting for only about 15 percent or so of the value of each food dollar purchased, but it is also that will take a little time to sort of pass through and so while we should see some increase in inflation, we’re not talking a real big spike in food inflation.
4. Certainly if you look at the futures contracts, all the nearby contracts for live cattle, lean hogs are all down. If you go out to the next year, they’re up and I think that tells you a little bit about how this filters into the food situation. That is, the price is immediate, we won’t see the impacts immediately through the livestock sector, but we will see some inflationary pressures in 2013.