Equity markets reacted skittishly Thursday, to the attack of a Malaysian airline over Ukraine that claimed the lives of nearly 300 civilians. While those responsible for the attack are yet to be determined, the development illustrated – once again – the dramatic impact that geopolitical tensions can have on markets.
The Dow declined about 150 points on the news, while crude oil moved $2 higher. Since Ukraine is a major wheat producer, those prices also rallied -- albeit more modestly.
Arguably, the biggest factor affecting grain prices these days is Mother Nature. But even as Corn Belt growers prepare for the double-edged sword of record production, persistent drought is resulting in fallow fields in the West.
And in California this week, officials went after water wasters.
Responding to the worst drought in four decades in California, state leaders passed dramatic legislation this week aimed at conserving the remaining supply of water.
The State Water Resources Control board authorized local agencies to fine those who waste water up to $500 a day.
The regulators acted amid warning that conditions could get worse if it doesn’t rain this winter.
Richard Howitt, UC Davis Center for Watershed Sciences: "This year, we've got to get by with one third less water than our regular supplies would be normally."
Agriculture accounts for 75 percent of the state’s water usage. Those in the Central Valley and other agricultural regions of the Golden State are seeing the devastating effects of the drought first-hand. Many fields are fallow this year as farmers look to conserve the precious resource.
But state officials are concerned that the urban and suburban residents in the southern part of the state may not be fully aware of the severity of the drought – the worst since the mid-1970’s.
Researchers at University of California, Davis’, Center for Watershed Sciences say better management of existing water supplies is needed to help protect the state’s $44 billion farming industry.
Richard Howitt, US Davis Center for Watershed Sciences: "The problem is that California is almost uniquely in the Western states of not measuring our ground water. So we're like somebody who is so rich they don't have to balance their checkbook. We're walking around signing checks and not even balancing the checkbook because we still think we are in a groundwater rich era."
Governor Jerry Brown: “Don’t make any mistake, this drought is a big wake up call.”
Governor Jerry Brown is seeking a statewide reduction of 20 percent, but Southern California residents say they’ve long been conserving water. Some water districts built their own storage facilities in recent decades and are not feeling the effects of the low amounts of moisture.
But, in May, statewide water consumption rose one percent amid voluntary conservation efforts. The growth has been driven, primarily, by an 8 percent usage increase along the southern coastal communities and rural northeastern areas whose water use jumped five percent.
Felicia Marcus, Chairwoman, State Water Resources Control Board: “It really behooves all of us to figure out how to use the water that we do have as wisely as we can.”
The fines announced this week will apply to wasteful outdoor uses which include landscape watering where runoff flows onto a sidewalk, washing a vehicle without a nozzle on the hose or hosing down sidewalks and driveways.
Cities and water districts were given some latitude on implementing the fines and the full $500 citation would apply solely for repeat offenders.
The board estimates the restrictions, due to take effect in early August, could save enough water statewide to supply more than 3.5 million people for a year.