Drought Is Becoming A Problem For The Economy

CA Drought

The Federal Reserve is out with its latest Beige Book report, and it’s become clear that drought conditions across the U.S. are becoming a problem.

From the text:

Agriculture conditions proved challenging in many Districts, with drought conditions reported by some Districts and excessive moisture reported in others. Drought conditions existed in parts of the San Francisco District, particularly in California and Arizona, resulting in a reduction in crop plantings and reduced herd sizes. Dallas also noted widespread drought conditions, especially in the Texas panhandle, as did the Chicago District in parts of Iowa. On the other hand, rains delayed plantings of crops in parts of the Atlanta and Minneapolis Districts. Planting progressed well overall in the Chicago District and in Idaho as reported by San Francisco. Minneapolis and San Francisco reported a loss of hogs due to a fatal virus, contributing to higher hog prices. More generally, low cattle supplies and strong demand resulted in high beef prices in Minneapolis and Kansas City. Both Kansas City and Dallas reported problems with the quality and quantity of the winter wheat crop, though winter wheat crops were generally in good condition in the St. Louis District.”

Last month, Mike Carlowicz of NASA Earth Observatory noted that as of May 6, half of the U.S. was experiencing some level of drought conditions.

More recently, BI’s Dina Spector chronicled the problems facing California’s Central Valley, known as the “nation’s salad bowl,” which is has been hard hit by drought.

Overall, the Beige Book was pretty solid, showing economic activity expanded in all 12 of the Federal Reserve’s Districts.

Following the report, the markets are little changed, keeping with the recent pattern of notably low volatility in financial markets.