Floods + Droughts = Higher Prices

Floods

With the Mississippi River floods, farmlands around those areas have taken quite the beating – some deliberately.  News and media outlets have mainly been focusing on the human element and damages to homes and infrastructure, and rightfully so. Estimates are predicting billions of dollars worth of damages once everything is said and done. There have been a few stories covering the potential economic impact of the Mississippi floods, but most have not gone further than that.

Even as water begins to recede, many farms still have to access damages and may even be left with unsuitable land to grow crops.

Now additional flooding along the Missouri River is threatening an additional 500,000 acres of key farmland in the western part of the Midwest. The U.S. Army Corps of Engineers is working hard to mitigate as much damage as possible, but they can only do so much.

Satellite Images Of South Dakota River Floods in 2011 – mouse over to see normal levels in 2005.

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Droughts

Flying under the national news and media radar is the major drought occurring mainly in Kansas, Oklahoma, Texas, and Louisiana. Economists with the American Farm Bureau Federation caution that the drought may bring about more devastation to livestock and crops than the floods will when these events are over.

In Texas alone, according to the Texas AgriLife Extension Service, impact on agriculture alone is already approaching $1.5 billion. With the increase of feeding costs from strained supply and loss of grazing land due to the drought, livestock production losses are up to $1.2 billion. It should be noted that Texas is the largest beef producing state.

While global food prices did drop slightly, I don’t expect them to drop any further in the coming months. In fact, I would expect them to rise after these events caused by poor weather conditions.

It might not be a bad time to examine commodity prices…

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