Already I am feeling wiser from reading the TIME magazine. Here is another input for US drought which can greatly affect world market since it's affecting crops such as corns, wheats and soy beans. Excerpt taken from TIME Aug 13, 2012 issue.
2012 has been the driest year for US in recent memory. Meteorologists call drought the creeping disaster because unlike hurricanes and tornadoes, droughts unfold in slow motion, day after dry day. The 2012 flash drought, though, is proving to be anything but a slow burn. From mid June to mid July, drought gobbled up cropland at an alarming rate, pushing the amount of land under severe drought from 17% to 39% of the continental US.
Bone-dry weather combined with high temperatures, sucked the moisture from the air and the soil, toasting America's breadbasket. Crops are wilting in Corn Belt states, where some farmers have already given up on a harvest. According to USDA, only 24% of corn crop is rated good / excellent whereas 48% is rated poor / very poor. Corn prices rise to $8.20 a bushel, compared to less than $7 a bushel at this time last year.
The torrid weather can't hit at a possibly worse time, when the grain stockpiles are unusually low, increasing pressure on prices. If the drought lingers, we can expect to see costlier food in US and, even worse, in developing nations where hundreds of millions already go hungry. We've seen this before. Sharp spike in food prices in 2007 and 2010 helped fuel riots and even possibly sparked Arab Spring.
While farmers are the first victims of drought, a lot has changed. For one, today's American farmers are doing well: due to high crop prices, fed by growing incomes in overseas market like China and by mandates for corn ethanol. Farmland in Midwest was going for 10 times as much per acre (0.4 hectares) as it was a decade ago. There are only ~1.2 million farmers in US now, compared with 6.8 million in 1935 but they tend to be better off than the average American.
In fact, some farmers may benefit from the drought. Growers in the northern reaches of Corn Belt were spared from the worst, hence are able to take advantage of record prices. But even those farmers who have given up on their field, won't go under, thanks to subsidised crop insurance. 85% of all planted land in US is covered by some crop-disaster insurance. Insurance plans with harvest-price option will pay for crops destroyed by the drought at market price, which had increased due to the drought itself.
US government subsidises much of the cost of private insurance hence it will the taxpayers who will be footing a good deal of the bill. Crop-insurance companies are just not going to be able to take on these losses. How big will the bill be? Last year indemnities losses reached $10.7 billion due to drought in Texas and Southwest, so this year's even drier weather will surely cost more. Corn farmers with subsidised insurance seemed to be able to weather the weather but everyone else in the food chain will be worse off.
Livestock farmers have to buy high-priced corn to feed their animals since pastures are charred. Hog farmers, who depend on cheap corn, are hurting badly. Some ranchers even sell their cattle early out of desperation and US cattle inventory is at its lowest level since 1973. This will lower beef prices in short term as a glut of cattle reaches markets, but prices will rise as the industry struggles to rebuild itself after two crippling droughts in a row.
The cost of everything from hamburgers to cereals to Gatorade could go higher since corn is the base of US food pyramid. 50% increase in corn prices usually increases retail food prices by 0.5% to 1%.This will take several months for the processed-and-packaged-food industry to feel the heat. Still, Americans are well insulated from the increased crop price since their diets are so full of processed goods that only 15cents of every dollar they spend on food really goes to food. Most goes to packaging and advertising.
But that's not the case with developing nations, where hundreds of millions live on plain tortillas or bread and the cost of commodities really is the cost of food. The problem could be acute in Egypt, a food importer that was already suffering financially even before drought.
The effect of drought is really not to be undermined. Reduced US harvest increases prices overseas. Not to mention the global spike in food prices, which could have led to social unrest In America Latin and Middle East. It is tightening the global corn and soybeans stocks which were already tight even before the drought. Higher costs for commodity crops will cut into charity budgets, limiting the amount of food aids, even as those high prices erode the ability of the global poor to fend for themselves.
Much depends on whether this 2012 drought is just a flash. Forecasters are predicting that the drought will last until at least October, if not longer. And then there are the years beyond. While climate change has had an uncertain effect on 2012 drought - blame La Nina, the periodic ocean cooling that can wreak havoc with weather - there's general agreement that dry conditions will become ever more common in Midwest as the world warms. The creeping disaster could be here to stay.
When it comes to natural disaster, we humans have not much say in it. I guess that's why the environmentalists are busy lobbying for nature preservation efforts to contain any further deterioration of global climate change. A drought alone - not even counting hurricanes, storms, etc - can wreak enough havoc across the globe as it directly affects food source, which is required to feed the nation. And only when a nation is fed can social stability be achieved, something which China had learnt to sustain all this while through their abundant food reserve.
Whether there will be an Apocalypse towards end 2012 is yet to be seen - I personally don't believe in it - but it shows here that everyone's effort counts when it comes to preserving the nature. Everyone on Earth has the responsibility to do their part in leaving a sustainable Earth to the next generation. I dread to think that my next of kin will have to don respiratory masks just to breathe.
So let's do our part even if it seems very minor or even insignificant, but hey, don't undermine these small gestures. So let's use reusable container instead of polystyrene, let's reduce unnecessary waste of water or energy, let's car-pool when possible, let's..... think of whichever way you can contribute to a greener world.
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