WASHINGTON, July 18, 2012 – Fresh from a briefing with President Barack Obama this morning, Agriculture Secretary Tom Vilsack described the drought that’s gripping much of the nation’s mid-section as the “most serious situation we’ve had probably in 25 years.”

Although the full extent of the damage won’t be known until after harvest, Vilsack said during a White House press briefing that there was no question that the drought will result in sharply higher crop prices and put pressure on the U.S. livestock sector, especially dairies.  On Monday, the National Climatic Data Center called the June Palmer drought index value at 55% ‑ the largest since 1956 ‑ when 58% of the contiguous United States was in moderate to extreme drought. 

Ealier today, he designated an additional 39 counties in eight states as primary natural disaster areas. So far this year, USDA  has disgnated 1,297 counties across 29 states as disaster areas, making all qualified farm operators eligible for low interest emergency loans.

Despite the fact that 78 percent of the corn crop and 77 percent of the soybean crop has been impacted by drought as of July 10, Vilsack said the extent of the crop losses are very difficult to specify, partly because new seed technologies have made plants more drought-resistant. Based on estimates today, he said the U.S. corn crop would still be 3rd largest in U.S. history.

 

Vilsack said there was no need for EPA to consider rolling back the Renewable Fuel Standard (RFS) ethanol mandates for this year.

 

“There is no need to go to the EPA at this time based on the quantity of ethanol that is in storage,” he noted.

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Vilsack told reporters that, although the drought could lead to higher food costs several months from now, but lead to some lower prices in the short term.

That’s because livestock producers will begin the process of potentially reducing their herds in light of higher feed costs, and we would anticipate, in the short term, actually food prices for beef, poultry, pork may go down a bit,but over time they will rise. 

“We will probably see those higher prices later this year, first part of next year.  Processed foods obviously impacted by crop yields, and we will likely see the increase of that also in 2013.

 But the Agriculture Secretary also warned consumers to be on the lookout for price gouging.

“It's important to note that farmers only receive 14 cents of every food dollar that goes through the grocery store, so even though prices on commodities increase significantly, it doesn’t necessarily translate into large increases for food prices.  And if, in fact, people are beginning to see food price increases now, it is not in any way, shape, or form, related to the drought.  And we should be very careful to keep an eye on that to make sure that people do not take advantage of a very difficult and painful situation. 

 

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This story was revised at 6:19 EDT to reflect additional comments from Sec. Vilsack. 

 

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