AccuWeather reports the persistent drought in California and other parts of the country continues to be a drag on the agricultural sector of the U.S. economy, according to the Federal Reserve.
AccuWeather.com long-range forecasters are predicting the historic California drought will only worsen this summer.
Agricultural conditions have worsened slightly due to wet fields, drought, and a cold winter between mid-February and the end of March, the Fed reported in its April 15, 2015, edition of the Beige Book, a compilation of economic conditions across the 12 Federal Reserve Districts.
The drought will have a significant and prolonged impact on the economy, AccuWeather Enterprise Solutions Senior Research Analyst Rosemary Radich said.
“As water resources become more scarce, price and demand will have disruptive effects on the economy for agriculture, retail, and food service,” Radich said.
Drought conditions continued to create challenges for many farmers, but those with adequate access to water benefited from favorable weather conditions in California, the Southwest and Pacific Northwest, the Fed said.
“Reduced water availability affected plantings of annual crops, including rice, corn and cotton,” the report stated. “The need to purchase water or drill for water put upward pressure on the cost of production.”
Drought conditions improved but still persisted in some areas of the Atlanta, Dallas and San Francisco districts, while wet field conditions slowed planting in parts of Richmond, Chicago, St. Louis and Dallas, according to the report.
California received some precipitation this winter, but it was not enough to halt the four-year-old drought.
Very little snowfall accumulated in the Sierra Mountains during the winter, exacerbating the California drought.
Drought conditions are expected to expand into the Pacific Northwest, AccuWeather.com Expert Long-Range Forecaster Paul Pastelok said as part of the summer 2015 forecast. Temperatures are also expected to increase along with the dry conditions.
“Precipitation is way below normal,” AccuWeather.com Senior Meteorologist Dale Mohler said. “There will be some tough decisions to make: Where does the water go? People need the water to consume. You have to reduce consumption somewhere. It will be a tug of war.”
“If there is too little rain, the crops get stunted,” Mohler said. “California and Arizona rely on irrigation; otherwise, they would not have vegetables and fruits. Farmers absolutely have to rely on irrigation in the San Joaquin Valley.”
Corn and soybean prices fell in the Atlanta, Chicago, Minneapolis and Kansas City districts, the Fed said. Chicago and St. Louis districts reported that less corn would be planted this year, being replaced by soybeans.
Farmers tend to split between corn and soybeans in the Midwest, depending on the market price, Mohler said. Soybeans, which yield between 30 and 50 bushels per acre, are about double the price of corn.
Rainy weather is expected this summer in the southern Plains and the lower to mid-Mississippi Valley. Drought conditions may initially improve in parts of Texas but could reappear later in the summer, AccuWeather.com meteorologists forecast.
