Plains wilt under droughtand it’s not yet high summer

Press, 6 July 1988, Page 18

Plains wilt under drought—and it’s not yet high summer

The central United States is facing its worst drought in 50 years. However, stockpiles are blunting food price rises, the “Economist” reports

Middle America is like the inside of a brick oven. Its ’pastures and hayfields are baked a dingy brown. Its maize, struggling out of cracked, dusty soil, is ailing but could be saved. Its soyabeans could still turn out well — if a long, soaking rain arrives. Soon. The drought now afflicting much of the country is potentially the most perilous in half a century, not so much because of how long it has lasted but because of when it started. The driest spring in more than 50 years has parched the land, slowed or stranded barges on the waterways, strained urban water supplies, turned forests to tinder and raised fears of higher food bills.

All this before mid-summer. Recent rain showers, where they have fallen, have teased rather than quenched the thirst.

The worst-affected parts are the northern Great Plains, especially in Montana, Minnesota and North Dakota, and parts of the south-east, especially Tennessee, North Carolina and Georgia. These regions have had less than a quarter of their normal rainfall this year. Temperatures have been persistently above normal: 67 places in 23 states broke temperature records for the solstice on June 21. And the hottest months are yet to come. For city dwellers this means discomfort and inconvenience: many Californian towns have imposed water rationing, obliging car washers to lay down their hosepipes in favour of buckets, and restaurant owners to provide water only on request. But for those who depend for their livelihood on the land or the rivers, the drought may mean ruin.

The combined flow of the Columbia, the St Lawrence and the Mississippi, three . of America’s four largest rivers, is now down to 63 per cent of normal. The Mississippi is lower than at any time on record. Shipping has come to a near standstill near Memphis and

Greenville: about half the normal tonnage is moving. On the Ohio near Mound City the water was no more than 2.3 metres deep in mid-June and several barges ran aground. The Army Corps of Engineers dredged a channel on June 18, but it was soon blocked by grounded colliers after only 18 of the 86 tow-boats with their barges waiting to get through had passed. The ports on the Great Lakes, which offer another way out to the sea, are busier than ever.

It is premature to draw a parallel with the dustbowl of the 19305, when six years of hot dry winds carried off much of the dusty soil in boiling black clouds, and drove thousands of farmers off the land. America is a long way from that, and today’s better farming techniques would prevent wind erosion on such a scale. Nonetheless, 1988 is the driest spring since 1936. The culprit, as usual, is the jetstream, the high-altitude wind that guides the rain-producing low-pressure systems. This year the jet-stream has split, flowing round to the north and south of a firmly entrenched high-pressure zone that sits over the central United States.

The longer such a “blocking high” lasts, the harder it is to shift and the hotter grows the air within it. To the north and south, Hudson’s Bay and the Arizona desert are getting more than their fair share of rain. The farmers of the Great Plains in between can only look at the sky and do what farmers do best: worry.

For them, the drought could not have come at a crueller time.

Many farmers were just picking themselves off the floor after the financial blows dealt them in the 1980 s by low prices, gluts and high interest rates. They were beginning to invest in new equipment. Now comes the threat of a complete crop failure.

In North Dakota farmers are already ploughing their crops back into the ground. In Minnesota half the wheat, barley and sugar-beet crops may be lost. In Montana the oat and barley crops are all but ruined. Relatively few farmers have insured their crops. Perhaps a fifth of the country’s harvest is already lost. To economists, the drought presents a rare spectacle: farm prices set by supply and demand rather than government fiat. It also presents a minor mystery. Prices have been soaring for the crop least affected by the drought, soyabeans, while they have risen only modestly for the most affected, wheat. As in most agricultural mysteries, however, the solution lies in government attempts to meddle in the market.

Thanks to strong demand and successful subsidy-cutting, America’s soyabean stockpiles amount to only just over 10 per cent of a normal crop. Though soyabeans are hardy plants — and could still provide a normal crop if rains come by mid-July — traders fear that stockpiles are too small to blunt the impact of any shortfall and are gambling that the drought will last another month.

Besides, soyabean markets can absorb price rises without dampening demand. About 45 per cent of America’s soyabeans

are exported to markets where the weak dollar masks dollar price rises. So prices of soyabeans have rocketed up in the Chicago trading pits from SUS7.9B a bushel at the end of May to 5U510.46 on June 21. By contrast, stockpiles of maize stand at about two-thirds of a normal year’s harvest. With some 20 per cent of this year’s crop already destroyed by drought, and another 20 per cent likely to wither if rain does not fall by the time of pollination in early July, prices have risen to over SUS 3 a bushel, 50 per cent higher than at the end of May. But that price should lure on to the market the half of the maize stockpiles held as security for farm loans. And, if the price stays at current levels, it will trigger the release of another third of stocks held in the “farmer-owned reserve.”

Stockpiles are similarly moderating the rise in wheat prices. Nearly two-thirds of the crop of spring wheat has been destroyed in some states, but spring wheat accounts for only about a quarter of the country’s total wheat crop, and the winterwheat crop was almost ripe before the drought became severe. Wheat stockpiles amount to about two-thirds of a normal harvest, and release prices stand not too far above those now prevailing on the market. For consumers, rises in grain prices are likely to be further blunted by the layers of middlemen who handle these crops before they reach the shelves of supermarkets/ Fruit and vegetables are mostly unaffected by the drought, either because they are irrigated or because so many

are grown in areas not yet affected.

Pasta prices will be among the first to rise because durum wheat, from which pasta is made, is grown mainly in North Dakota and has largely withered away. Meat prices are falling, as farmers slaughter cattle rather than give them expensive feed. This may lead to a shortage next year, and so to higher meat prices. But Mr Dick Gady, an economist at Conagra, a diversified agribusiness, expects foodprice inflation to be 5 per cent or so this year, and little more next. Some have begun to wonder if the farm surpluses of the 1980 s will soon fade into history as the world returns to scarcity. The failure of the Indian monsoon last year brought that country back to international markets for the first time for several years. But predictions of world-wide shortages, like warnings of a new dustbowl, are based on a relentless continuation of the bad weather as well as on foolish political decisions. Admittedly, neither can be ruled out. Already the Reagan Administration and Congress are competing to take credit for a rescue operation. One way or another, an expensive aid package is likely to emerge from Washington. Rising grain prices may release about $ll billion that would otherwise go as deficiency payments to support the prices farmers receive, so Congress may decide to pay farmers the deficiency payments anyway, as relief for crops destroyed. The Agriculture Department has already opened up land for hay and grazing that was to be left untouched in its conservationreserve programme, one of the main parts of the 1985 farm bill. And, if indeed the drought does bring shortages, the Government will almost certainly open up vast new lands for planting next year. With normal yields, surpluses could return with a vengeance.

Copyright — The Economist