November 1, 2014

Economist: Drought will be felt far beyond the farm

A Creighton University economist says the drought that’s hit the region will “absolutely” be felt beyond the farm and will be a damper on the national economy.

Ernie Goss says his research finds the drought hitting beyond the farm field, impacting other businesses like ethanol plants and farm equipment dealers.

“Depending on the weather, we’re going to see some significant impacts,” Goss says. “And this is going to roll across the U.S., all the way from Wisconsin, Indiana, Illinois, Nebraska, Iowa, Minnesota — less impacts up further north — (and in) Missouri, very significant impacts, so this will have some impacts on GDP.”

The latest report shows the country’s Gross Domestic Product increased by one-and-a-half percent in the second quarter. A USDA report recently estimated food prices would climb five percent because of the drought.

Skyrocketing feed costs will lead to increased prices for not just beef and pork, but for many other grocery store items, including eggs, milk and cheese.

Each month, Goss and some of his colleagues at Creighton University survey bankers in the Midwest and his July survey is nearly complete.

“These are bank CEOs in rural portions of 10 states, average community size 1300. We asked them the impact of this drought. We asked about the impact on ethanol plants and biodiesel and two-thirds of those with ethanol and biodiesel plants in their area reported there were either cut-backs or shut-downs — temporary shut-downs, of course,” Goss says. “…We have an ag equipment sales index. (It) dropped to recession levels this month.”

Goss made his comments on the Iowa Public Television program, “Iowa Press.”