An Agricultural Apocalypse: This Drought Is Still Worse Than You Think

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When I decided to dedicate a few hours a week to sharing some insights on the energy world at large, I told myself that I would try to post about a different topic each week – at least for the first few months, before I covered the basics of all of major components of the energy world and started explaining how they fit together. But with respect to the current climate situation in America today, that cannot be the case this week. Right now the most important story is the drought, and most people are still missing it. Crop projections should continue to worsen until harvest, and agricultural commodities of all stripes are going to end up far more expensive once the dust settles.

The worst U.S. drought since the dust bowl.

This is the Dust Bowl of 2012, that was clear by mid-July. The full impact of the drought hasn’t unfolded yet, but that doesn’t change the magnitude of this event. I first attempted to publish an article on the drought the weekend of July 20-22. I succeeded in publishing an article a week later – with a few hastily updated statistics and a heavier tie-in to ethanol.

Continued below.

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But as the situation in the Midwest has gotten increasingly dire, discussion concerning the drought has consistently held a tone of dismissal, with many Seeking Alpha contributors treating this extraordinary climate event as though it were some form of media hype. Many of the published articles are rife with warnings of market corrections and whispers of possible rainfall. The media has also been slow to react and far less concerned than an event of this magnitude warrants. This is akin to dismissing the earthquake/tsunami that hit Fukushima last year as “just another earthquake in Japan.”

So only four articles into my new hobby I’ve chosen to re-address something that I had treated last week. I apologize to those that have already encountered the brief summary I previously offered.

Flash drought.

The big problem that most analysts are having with understanding the magnitude of the crisis is the extreme rapidity with which it occurred. The following map is taken from the U.S. Drought Monitor’s May 31 report:

Click to enlarge.

As you can see, at the start of June there was a drought in the Rockies and the Southwest, but no drought and little abnormal dryness in the corn belt or the breadbasket. The crop reports at the time projected record yields for 2012.

June news was dominated by the health care brouhaha and the record heat wave – and of course the ever-present crisis in Europe. The news showed a few shots of dry corn in early July and then there was an evil nut-job in Colorado who showed us all that we still can be shocked by horror in the real world, and then the Olympics started ramping up…

In the end, this just hasn’t taken hold in the media, and it therefore just doesn’t feel like a big deal. Besides, it’s only been two months! Worst case is the corn belt is shy around 10 inches of rain. Right?

Wrong.

This is the map from the current Drought Monitor report:

It’s clear that things have changed, and have changed quickly. There are now 1,452 counties in America that have been designated as disaster areas due to drought – a list that encompasses more than half the counties in America, a list that grew by 218 counties just last week.

For corn (CORN) specifically, I produced the following table (you can check my last article to compare a similar data set last week), specifically to track the impact on corn. The 20 states listed here are responsible for ~94% of the total corn production in America:

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