Iowa Public Television


Drought Promises Retail Impact

posted on August 23, 2002

Hello, I'm Mark Pearson.

It's the dog days of summer and the economic news is as slow and sultry as the weather.

The equities markets moved cautiously forward, with the Dow cracking the nine-thousand point barrier before retreating on Friday. Part of that advance was based on a slight drop in unemployment … and a prediction from the president of the Chicago Federal Reserve that the economy will grow.

The commodity markets are watching more tangible fundamentals, like the weather. In fact, the impact of the summer's hot, dry weather is being felt up and down the food chain.


From farm gate to dinner plate, the current drought is likely to have a ripple effect throughout the nation. A shrinking supply of feed, whether hay, corn or otherwise, means higher prices for livestock producers. The demand for forage is on the rise, creating even more pressure for corn supplies. One step forward on the supply chain, high feed prices have formed a wall of flesh as livestock producers cull herds to cut costs.

Long term, meat prices are likely to climb as the current glut disappears and smaller herds create tighter supplies.

Grain prices are also likely to affect other consumer goods such as cereals. Though the bulk of the name-brand cereal dollar goes to marketing, sharp price spikes are still causing concern in the commodity intensive sector. Some analysts predict a price increases at the grocery store of as much as one-and-one-half percent for everything from cereals to soda.


Tags: agriculture crops drought economy markets news shopping weather