Worsening Farm Drought Not Necessarily a Harbinger of Disaster, Economists Say

Drought is likely to parch the country’s farmland well into the summer, federal weather analysts said Thursday, but economists cautioned that the dry spell would not necessarily lead to economic disaster.

Even so, concern is spreading throughout the political establishment as reports mount of the widespread drought and the fears of farmers, and new data from the Weather Service’s Climate Analysis Center adds urgency to the complex policy questions facing federal officials.

A. James Wagner, a meteorologist at the center, said historical patterns of droughts that began in the early spring indicate that the current drought will worsen.

“Normally these summer droughts get worse as the summer progresses. Climatologically it’s hotter in the summer than in other times of the year and that hotter weather is augmented by the fact that the ground is dry and everything just literally bakes.”

Wagner said the dry, hot ground is helping to sustain the drought, retaining and magnifying heat, causing temperatures to be hotter than if the ground were moist and protected from the sun by the broad leaves that crops normally have by this time of year.

“The 30-day forecast is pretty definitively (showing) a dry pattern continually in the drought area,” Wagner said.

Large Crop Losses Possible

That could spell large crop losses in the Midwest and Southeast where much of the nation’s corn, soybeans, wheat and cotton are grown. But if the weather can be predicted, the economy cannot.

“It’s going to be a guessing game for a while yet,” said Gary L. Benjamin, an economist at the Federal Reserve Bank of Chicago. “It’s clearly an emotional issue right now . . . . If we could get some timely rains every few days or so, while it doesn’t amount to much in the aggregate, it could help pull this crop out.”

“The inflationary effect of the drought has been grossly overstated,” said Stuart Hardy, agricultural analyst for the U.S. Chamber of Commerce. “Both corn and soybeans, particularly soybeans, can survive all kinds of drought if they are able to develop a pretty good root system . . . and that has been the case in many areas despite the low moisture all year long . . . . Corn and soybeans in the Midwest have gotten a pretty good toehold and they can put up with quite a bit and survive.”

Agronomists agree that it is still too soon to write off this year’s crop, but the drought will probably reduce the number of bushels farmers harvest from each acre. Anticipation of those lower yields, coupled with shrinking surpluses in government grain bins, is already driving up commodity prices. That eventually will be passed on to consumers.

But a variety of factors are likely to temper any price increases.

Ample Corn Supplies

First, there are ample supplies of corn and wheat in government grain bins although the supply of soybeans--a major source of protein used in everything from tofu to hog feed--is low.

“Corn stocks are more than adequate to dampen any effect of the drought,” agricultural analyst John M. Schnittker said.

“We’re not going to run out of corn, we’re just going to run our stocks down,” said analyst Dale E. Hathaway, a former agriculture department official.

Second, the agricultural economy has become a global economy and the world no longer relies on the United States to feed it or to hold the planet’s grain reserves. While it is winter in the United States, Southern Hemisphere countries--particularly Argentina, Brazil and Australia--will be entering their spring planting season.

“They will increase their plantings of crops that have gone up in price,” said Iowa State University economist Neil Harl. Also helping to hold prices down will be substitutions of one commodity for another. For example, palm oil can be substituted in many foods for soybean oil. And if it is available, cotton seed can be substituted for soybean meal in animal feed.

Eventual Price Hikes

But increasing animal feed costs coupled with drought-depleted pastures and hay fields will result initially in lower meat prices as farmers liquidate their herds and flocks. Later, beef, pork and poultry prices will climb as demand outstrips supplies.

Schnittker estimates that higher meat costs could increase food inflation next year by 7% to 8%.

“In the short term there will be relatively little impact on food prices,” said American Farm Bureau economist Terry Francl. “The impact will take a number of months to work through the food chain, but it will lead to higher food prices in 1989.

“If normal rainfall returns in a few days, food inflation might go from the 3% to 5% range to the 5% to 8% range. If we don’t get rain the potential is for double-digit increases. But we will have to wait another three weeks before we know,” Francl said.

In one indication of federal concern over the drought Thursday, President Reagan ordered government agencies to identify and determine the adequacy of federal programs that might be used to help minimize the impact of the drought and to report back to him within two weeks.

“There is no more hopeless or helpless feeling than seeing your crops dry up, because there is no alleviating that disaster,” said White House spokesman Marlin Fitzwater, who grew up on a Kansas farm. “It is a morally destructive kind of thing for the farm family that is stricken with drought.”

Bush Visit Planned

Meanwhile, both Vice President George Bush and a bipartisan group of Senate Agriculture Committee members will make separate visits to drought-stricken parts of the Midwest this weekend.

Fitzwater said he expects the drought to be on the agenda when Reagan and other Western leaders meet in Toronto Sunday for an economic summit. Even before that meeting, U.S. Trade Representative Clayton K. Yeutter hinted Thursday that the United States would not impose restrictions on grain exports to keep food prices down at home, as it first did in 1973.

“Every time we’ve tried the embargo route we’ve shot ourselves in the foot,” Yeutter said in a White House briefing. But he did raise the possibility of dropping government subsidies on exported grain. Such subsidies were being used to make American surplus commodities more attractive to foreign buyers.

Staff writers Art Pine and James Gerstenzang in Washington and researcher Ruth Lopez in Chicago contributed to this story.