Inspired by The Bonddad Blog noodling around with charts, here’s a really simple explanation of what happened in the great drought of 1988, which the current farmbelt drought is being compared to.
The green line is year-over-year cereals/bread inflation. As you can see, by late 88/early ’89, inflation in this category was peaking around 9% (the left-hand y-axis). That was about tripls from the levels pre-and-post-drought.
The black line is Iowa farm income. As you can see from the right-side y-axes it fell by about 50% in 1988.
For the sake of comparison, here’s the same chart over the last 5 years.
As you can see, grain inflation is well less than 5% right now (pre-drought) though it got as high as 12.5% during the great commodities boom just prior to the economic crisis. Meanwhile, Iowa farm income (black line) is right near its highs.