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Drought threatens Mississippi shipping

You don’t hear much about the drought these days. But nothing has changed and the full effects of this drought may not be felt until mid 2013.

Closing the river in December and January would halt 10,600 barges, stopping the movement of about $7 billion worth of goods, according to a Nov. 28 study released by the Waterways Council and The American Waterways Operators.

The worst drought in decades may shut down the Mississippi River to barge traffic this month costing thousands of jobs.

Lynn Muench said. “If we do lose the river between mid-December and January, the jobs that are at risk in Missouri are almost 3,000 jobs ” alone.

The U.S. drought that began in 2011 and spread to a much wider area in 2012 continues. The latest U.S. Drought Monitor shows that the majority of the continental U.S. is affected. The intensity of the drought is rated on a five-step scale:

D0 Abnormally Dry
D1 Drought – Moderate
D2 Drought – Severe
D3 Drought – Extreme
D4 Drought – Exceptional

The first level on the scale is “Abnormally Dry”, meaning that the land is not quite under a drought, hence the D-zero designation. Then the four categories of drought increase from Moderate all the way up to Exceptional.

The amount of U.S. agricultural land area currently affected by some type of drought — from D1 to D4 — is astounding. But so too is the vast area rated at the level from Extreme to Exceptional. When you need to use a term greater than “Severe”, and even greater than “Extreme” to describe a drought, it is a serious problem.

In summer 2011, Texas and Oklahoma were under a D4 exceptional drought, but much of the Midwest to the north of Oklahoma was unaffected. The years 2009 and 2010 were relatively drought-free, although the 2011 to 2012 drought seems to have begun in the winter of 2010/2011. See the chart below comparing late November of 2012, from the latest Drought Monitor report, to late November of 2009. The difference is astounding:

Few people realize how severe the 2012 drought has been.

Already, corn yields for 2012 are greatly reduced compared to 2009.
2009 yields: 13,091.862 million bushels of corn
2012 yields: 10,725.191 million bushels of corn
The difference is a decrease of 2.366 billion bushels of corn (down 18%). A bushel of corn is 56 pounds, so that makes 132.496 billion pounds of corn lost to the drought, or about 66 million tons (2000 lbs/ton). Per acre yields have also fallen dramatically, from 164.7 bushels/acre in 2009 to 122.3 bushels/acre in 2012. And in the same space of time, the ‘weighted-average’ farm price for a bushel of corn has risen from $3.55 to $7.60 per bushel (USDA ERS data)

About 40% of the U.S. corn crop is used to make fuel ethanol, and about another 40% is used for livestock feed. It is unclear what effect the sharp increase in the price of corn will have on fuel ethanol, and potentially on gas prices at the pump. But the increased cost of livestock feed is anticipated to effect food prices.

What happens is simple. Ranchers cannot afford to feed their entire herd, because about 95% of feed grain production in the U.S. is corn (USDA ERS: Corn). So ranchers sell off their cattle, temporarily increasing the meat supply. But within a few months, the reduced size of the herds will mean a shorter supply and higher prices. The same process could well occur with poultry and lamb and possibly farmed fish. Dairy prices are also likely to rise sharply, for much the same reasons. By sometime in 2013, we should see higher prices across the board for meat, poultry, fish, and dairy.

The point that I would like to emphasize, though, is that the drought is not yet over. And if it continues throughout much of 2013, the effects on the food economy will be substantial, much greater than anyone now realizes

Agricultural products and the huge agribusiness industry that has developed in the Mississippi River basin produce 92% of the nation’s agricultural exports, 78% of the world’s exports in feed grains and soybeans, and most of the livestock and hogs produced nationally. Sixty percent of all grain exported from the US is shipped on the Mississippi River through the Port of New Orleans and the Port of South Louisiana.

Therefore shutting down the shipping on the Mississippi River is a significant development caused by ths drought. It will have a significant impact around the world if the drought continues much longer.

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