Business, Finance & Economics

Why the US Drought May Be Felt Around the Globe

The impact of this summer's drought in the US may well be felt around the globe. That's because the US is the world's biggest corn exporter. As harvests fall and prices rise, many of world's poor will feel the squeeze.

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You might not know it to look at, but farmer Ben Keil's corn crop is in big trouble. The familiar tufted ears can look normal and make the usual rubbery pop when you pull them open, but, Keil says, even in late July most of them don't have many kernels. And down below, the dirt sits loose and lifeless underfoot.

"It's never had enough rain to melt back together," he says.

Kiel's 1,600 acres in northwestern Ohio have been decimated by this summer's drought. He could be considered among the lucky farmers in this part of the country. At least his corn is still alive. This summer's drought is even worse to the west in Indiana and Illinois. But Keil says the end result is pretty much the same.

"Realistically, you can't expect the stock to even produce an ear that's harvestable," he says, "even with beneficial rains from here on out the rest of the summer. The corn's already reached pollination and it's pretty well done."

Keil expects to get about a sixth of his usual corn crop. He's already lost half his soybeans. And the outlook for the national corn harvest is getting bleaker almost by the day.

Dan Basse, an economist with the Chicago research firm Ag Resource Company, says he fears the US corn crop could end up being as small as 10 billion bushels–3 billion less than the latest USDA estimate and a drop of a third from the Department of Agriculture's original projections.

Basse says that's likely to trigger clashes between the country's major corn consumers, with meat producers, food processors and even ethanol refineries fighting to get their share.

And other countries that depend on corn exports from the US could be in an even more precarious position, because the US is the worlds' biggest exporter of corn and one of the biggest exporters of soy and wheat.

David Lobell, of Stanford University's Center on Food Security and the Environment, says the US is crucial to global production of food.

"It's almost twice as important for food as Saudi Arabia is for oil," Lobell says. "So when something happens in the US, it really has implications for everyone in the world, especially for countries that rely on imports of things like corn or wheat."

So far, few are predicting a return to an all out global food crisis like the one in 2008 that caused riots in some 30 countries. That's because national grain reserves still provide some buffer to the markets.

But Lobell says that buffer may not last.

"The expectation is those stocks will be built back up, but we haven't had a chance to catch our breath" Lobell says. "The demand keeps going up and we haven't some good years of harvest to build up stocks. So the mechanism for the cushion is there, but basically our shock absorbers have been worn thin."

Those shock absorbers have also worn thin for world's most impoverished people. Marie Brill, a senior policy analyst with the anti-poverty group ActionAid says after the 2008 food crisis and the subsequent price spikes in 2010 and 2011, the poorest of the poor have exhausted many of their tools for coping with higher prices–things like taking on more debt, cutting health care and education expenses, or even cutting a meal out of their day.

Brill says that while US consumers spend an average of 10 percent of their income on food, people in the developing world can spend upwards of 70 percent. So even small price increases in grains like corn can put family meals out of reach.

"Think about places like Kenya or Uganda," Brill says, "where ugali is made from corn meal, it's a staple food. Or tortillas in Mexico is another good example. All of a sudden you can't afford to buy it, you really see that impact in terms of rising poverty."

Brill says the 2008 global food crisis plunged an additional 100 million people into extreme poverty.

Add climate change into the mix and the global food system looks even shakier.

Stanford's David Lobell says there's still a lot of debate as to whether the crisis in the Midwest is due to global warming. But he says the heat wave that's accompanied the drought is exactly what the climate models have predicted.

Brill says this year is "kind of an illustration of the kind of thing we worry about with climate change. With climate change, the saying is you're playing with a loaded dice now. And in a sense, this year was the US's turn for a bad role of that dice."

Climate scientists tell us to expect more and more such bad rolls in the future, with hotter summers becoming the new normal. And it's the heat, even more than the lack of rain, that's got farmers like Ohio's Ben Keil in such dire straits–especially when it hits during the critical pollination stage.

"Crops don't like heat," Keil says. "And the plants know it. You can have nice tall and showy corn and still not have anything on the cob, because it didn't pollinate well."

Keil isn't ready to blame his problems on global warming. But he says whatever's behind this year's bad weather, something is definitely changing.

"I always say I hope I can remember what normal is by the time we have a normal year," Keil says, "because nothing's normal anymore."

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    Drought-stricken corn in Ohio. (Photo: Karen Schaefer)

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    Drought-stricken corn in Ohio. (Photo: Karen Schaefer)

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    Drought-stricken corn in Ohio. (Photo: Karen Schaefer)