Drought 2012: Stokes the Food As Fuel Debate

The U.S. government requires about 13 billion gallons of ethanol to be used in the nation's gasoline. To achieve this, nearly half of the nation's corn crops go to not feeding people but to powering motor vehicles.

Since 2005, the U.S. government has mandated that gasoline contain ethanol, mostly derived from corn. The policy intent was to reduce dependency on foreign oil imports and improve air quality. It has also been a boon for corn farmers.

But in the midst of the worst drought since 1934, the faults of this policy that forces nearly half the U.S. corn harvest into fuel production. And with corn prices at record highs, the ethanol requirements are fueling increased food costs and spreading it to the price of gasoline, which is up almost 40 cents a gallon since early July.

Beef and pork ranchers are slaughtering their herds at a record rate to cut their corn feed costs which have gone up more than 30% in three months. As a result, U.S. cattle herds next year are projected to be the smallest since 1952, a guarantee of more expensive food in years to come.

Th drought exposes the notion of trying to expand an industry where the economics of it don't make sense. Based on its energy content, ethanol is approximately 50% more expensive than gasoline and the acreage required to produce it distorts land prices.

Tractors run on diesel fuel that plow the fields, plant seed, harvest the crop and haul it to refining plants. Ethanol is also highly corrosive and can’t be transported by pipeline, unlike oil. Trucks or trains must carry the finished product to gasoline blenders. In short, ethanol requires more energy to produce than it actually yields, negating the environmental benefits.

Earlier this month the United Nations Food and Agriculture Organization issued a statement urging "an immediate, temporary suspension" of America's use of corn to produce ethanol, in order to "allow more of the crop to be channelled toward food and feed uses."

Natural disasters can't be controlled, but ethanol is a man-made disaster that needs to be stopped.

Drought 2012: Food Prices to Surge Higher - USDA

The drought of 2012 has sent corn, wheat and other commodity prices soaring to record or near record levels in recent weeks as U.S. crops continue to dry out.

The record drought gripping half the US will help push food prices up by 3% to 4% next year, according to the Department of Agriculture.

"In 2013 as a result of this drought we are looking at above-normal food price inflation. Consumers are certainly going to feel it," USDA economist Richard Volpe said.

Milk, eggs, beef, poultry and pork prices will all be affected by the drought, which has pushed up prices for feed.

• Beef prices are expected to see the biggest jump at 5% to 7%.
• Dairy product prices are forecast to climb 5% to 6%.
• Poultry and egg prices are projected to rise 4% to 5%.
• Pork prices are expected to rise 4% to 5%.

With farmers and others warning that prices will rise, the drought has sent corn, soybean and other commodity prices soaring in recent weeks as fields wither under the heat across much of the Midwest.

The drought is not expected to affect prices for fruits and vegetables as most of those crops are irrigated. However, the USDA is forecasting a 2% to 3% for all fruits and vegetables in 2013.

Drought 2012: Global Impact of Wilting U.S. Crops - Video

 

At least 32 states are feeling the effects of the drought as the unrelenting heat has pushed grain prices to record levels.

Corn is the major U.S. crop and a bad year drives the price up on everything from beef to cereal to fuel. As crops continue to wilt, farmers and consumers around the world are looking towards the sky, hoping for rain.

Drought 2012: U.S. Infrastructure Melting Under Record Heat

Airliners stuck in melting asphalt. Highways in Texas are buckling. A New York subway train derails after heat stretches the track. America is becoming alarmed by the effects of extreme weather on its aging infrastructure.

In the midst of the worst drought since the Dust Bowl, America's infrastructure is taking the toll. This year has recorded the warmest spring since record-keeping began in 1895. July 2011 to June 2012 was the hottest 12 months on record.

This summer, a Chicago nuclear power plant was required to get permission to keep operating because the pond it used for cooling water reached 102 degrees, surpassing the legal limit by two degrees, and a power plant nearby was forced to shut down because much of its cooling water had dried up.

Severe storms have also been leaving their mark. On June 29th, a storm in the Northeast left 4.3 million people without power, causing electric company Pepco to seriously contemplate burying its power lines – an endeavour which, at a cost of $1.1 to $5.8 billion, it ultimately deemed too expensive. In the past two and a half years, Pepco has dealt with five storms for which recovery took at least five days.

In 2011, 14 extreme weather-related events cost the US economy more than $55 billion.

And then there are the wild fires - like the fire that wiped out large parts of Colorado this summer. Aside from immediate damage caused by fires and storms, they can also affect water quality and water use, since run-off from storms and falling ash can shut down reservoirs.

As the US continues to melt, crack and burn with each major storm and drought, its infrastructure continues to collapse, as it already struggles with crop harvest shortages and rising food prices.

Drought 2012: Mississippi River On The Verge Of Shut Down

The record-breaking drought of 2012 is drying up the Mississippi River, which is critical for commercial travel. If the shrinkage continues at the current rate, all river traffic could be shut down costing the U.S. $300 million a day in commerce.

The Mississippi River is the highway accounts for 60% percent of grain, 22% of oil and natural gas and 20% of coal transportation.

But its narrowing and shallow waters are forcing barges to stop running or to reduce the weight of the goods they carry which is now showing up at the grocery store – leading to shortages. Areas of the river have dropped 20 feet below normal – and the decline is expected to continue.

If the Mississippi River is closed to all water traffic, goods like grain, oil, natural gas and coal will need to be transported by truck or train – costing the US an additional $300 million a day.

The American Queen Steamboat, which needs eight and a half feet (2.6 meters) of water to float, can no longer navigate the river after getting stuck in a town near Memphis, Tennessee. Its 300 passengers were forced to abandon their river voyage and reach their destination by bus instead.

In some parts of the Mississippi River, the salt water is moving upriver, threatening drinking water extracted from other areas. All river traffic was shut down for 12 hours to give the US Army Corps of Engineers time to try to keep the salt water contained.

In other areas, millions of fish are dying as the bottom of the river transforms into an exposed desert. The river flows into lakes and streams across the US, carrying the devastation to all corners of the Midwest. About 40,000 shovel-nose sturgeon fish were killed in Iowa in one week as water temperatures reached 97 degrees. In Illinois, fish carcasses clogged an intake screen near a power plant, causing it to shut down one of its generators.

But in some areas, dead fish can be found shrivelled up on barren land that used to be underwater.

If the Mississippi River continues to dry out, food shortages will only be part of the concern, as the economy could be slapped by rising cargo transportation prices.

Drought 2012: Food Shortages and Global Unrest Possible

Worst Drought Since Dust Bowl

With more than half the US in the grips of the worst drought since the 1934 Dust Bowl, shortages and rising global prices which on corn, wheat and soybeans, which America is the world’s largest exporter, could lead to global unrest.

World prices for corn, wheat and soybeans have already reached record levels, and will continue to affect developing countries that rely on on agricultural imports for food.

“The drought is clearly going to kick prices up. It already has,” said NECSI president Yaneer Bar-Yam. “We’ve created an unstable system. Globally, we are very vulnerable.”

Deregulation has not help the situation. In the late 1990s, food markets were deregulated, allowing hedge funds and investments banks to speculate on prices, making markets susceptible to sudden, sometimes massive, price fluctuations.

“The drought may trigger the third massive price spike to occur earlier than otherwise expected, beginning immediately,” wrote the NECSI team. Price hikes have been credited as the cause of the Yemeni uprising in 2008 that led to food riots and widespread violence. During that same year, killings occurred in Haiti over the doubling of the price of rice, resulting in government rice warehouses being looted.

The 1934 drought and dust storms millions of acres of crops and left 80% of America experiencing food shortages. At a time when much of the world relies on the US for food staples like corn, wheat and soybean, the impact of the 2012 drought could lead to increased global hunger and violence.

Drought 2012: Biggest Natural Disaster in US History

No Relief for America's Heartland

More than half of America is in areas designated natural disaster sites by the USDA have been ravaged by a dry spell destroying crops in nearly 1,600 counties in 32 states.

Among those effected by damage, reports Bloomberg News, are approximately 1/3 of the nation’s farmers, which contributes in making this declaration the largest ever of its kind by the Department of Agriculture.

“Agriculture remains a bright spot in our nation’s economy,” Agriculture Secretary Tom Vilsack tells the country this week in an official statement. “We need to be cognizant of the fact that drought and weather conditions have severely impacted farmers around the country.”

The heartland of America's agriculture community, the Midwest, is suffering from moderate to extreme drought.

“Farmers and ranchers are at the mercy of Mother Nature,” Kansas Governor Sam Brownback says in a statement. Brownback’s state produced $8.2 billion in crops in 2010, but with historic dry weather whithering crops this year, Kansas expects a monumental drop.

Corn, the largest cash crop in the US, has been the hardest hit by the drought with only 35% of corn supply in good to excellent condition as of this past weekend, down from 48% percent only a few weeks ago. Soybean crops, America’s other top agriculture product, has also been largely destroyed.