America’s drought, heat will affect our farms, food supply, grocery prices. This is how

The entire nation is having a hot summer. For much of the country, it is also a dry one. How will this affect our economy? What about households, since all of us buy food?

The answer varies by economic sector and geographic location and may worsen if it stays this dry in the coming weeks.

Tourism in western states is getting hammered right now. We are getting to a point where hydropower production is becoming limited. Contractual power shutdowns or brownouts will hurt some industries.

Agriculture, though, will be the primary issue, at least in the short- to medium term, at first for the myriad farmers facing failed crops and eventually to all of us who eat food.

Sharp geographic dividing lines exist between drought and normal produce. The traditional winter wheat belt of the lower Great Plains, Texas, Oklahoma, eastern Colorado and Kansas is in pretty good shape. The spring wheat belt from northwest Minnesota out across Montana is in real trouble.

The classic corn belt states of Missouri, Illinois, Indiana and Ohio are not in drought. Nebraska has little, as does Wisconsin. Iowa is mixed. Until recent decades, most soybeans also were grown in these states or the Deep South. These acreages have not declined, but have burgeoned in North Dakota, displacing wheat.

These are the major field crops, little of which is directly eaten by humans, though we buy flour and cooking oil in supermarkets. We export all of these, and the markets from which their prices are determined are global.

Now take vegetables, fruits and nuts. California predominates. Washington, Oregon and Arizona also play a big role. In California and Arizona, these are nearly all irrigated, but irrigation water is becoming scarcer. And the heat, even more than any lack of rain, ruined large proportions of grapes, both for table and wine, in California, along with cherries and other fruits in the two states to the north.

Will prices go up? Yes for some things, not much for others. How much and for how long depends on a key micro econ subject, the “elasticity” of supply and demand. This measures how much of a change in price occurs when circumstances change the quantities of the item and vice versa. The more “inelastic” some product is, the greater the percentage jumps in price for a given percentage change in quantity.

Demand for luxuries is elastic. We don’t need a $5,000 Peloton bike. Demand for necessities is “inelastic.” Few things are more necessary than food.

At the same time, food supply also is often inelastic. It takes years for new cherry or almond trees to produce or even for a new-born heifer calf to produce milk.

Once soybeans or wheat are planted, acreage cannot change until next year. For irrigated radishes, broccoli and lettuce, it may be only weeks, if water is available. But even these lags can lead to “shortages” that spike prices in the short run.

So grocery prices will yo-yo. Given the vast area and duration of this drought in the west, adjustment will take quite some time.

Do understand, however, that just because California produces such huge fractions of vegetables and fruits, if it turns into a desert, we won’t all starve. There are many other places where these all grow well.

New Jersey was called “the Garden State” for good reasons. My Dutch-farm-boy grandfather first came to the United States in 1898 to work producing vegetables on Maryland’s Eastern Shore. Baltimore had a vast canning industry, the largest in the nation. And Heinz catsup is based in Pennsylvania because that state had large areas suited to growing tomatoes. But a century ago, these areas lost out to highly subsidized federal irrigation water in California.

All could produce again, as could many other areas. Michigan could ramp up sour cherry and blueberry production. It has always grown thousands of tons of radishes, beets, carrots, onions, turnips and so forth. Georgia is known for peaches and onions, but could produce a wide range of other goods.

However, you cannot make instantaneous adjustments. The New York Times ran an excellent article on the woes of California processed-tomato producers, who have had to slash acreages. The United States is a substantial net exporter of processed tomatoes, so current cuts won’t affect domestic supplies much. But if we are facing a new climate, as I and many others think we are, then getting the billions of dollars of processing, packing and shipping infrastructure moved to regions of adequate rainfall areas will take time and money.

The fact that we are such a large net exporter of grains and oil seeds dampens price fluctuations in the U.S. When we had an ag economy closed off from trade by a highly overvalued U.S. dollar under the Bretton Woods agreement, a bad crop would all have to be absorbed here. Tariffs and lack of import infrastructure made bringing food from other countries difficult.

But for the last half-century, U.S. agriculture has been a major factor in global markets. A cut in U.S. soy or corn or wheat exports will raise global prices somewhat, and that will be reflected here. But fluctuations will be less than for produce. Effects will show up in meat, dairy and poultry products.

Drought-hit farmers will buy fewer new pickups or tractors, invest less in facilities, stop going out to have a good steak on Saturday nights and so on. The larger economy, however, will march on.

Economist and writer Edward Lotterman, a former Idaho Statesman columnist and now an occasional contributor, can be reached at stpaul@edlotterman.com.