I’m concerned about food production. How will the current drought affect us?

This question was posed by Sam A – Dallas, Texas. Potentially, the current drought could worsen, rivaling the Dust-bowl era. Already corn, soybeans, wheat and other crops have been affected by as much as 60 percent. This will cause a general slow, steady rise in food prices. If the drought lasts 6 or more months, generally water restrictions will be implemented, energy, fuel, and transportation costs will rise, other foodstuffs such as vegetables, etc. will increase, and migration from rural to urban areas could ensue. All of this was noted during the 1995 Texas drought disaster that lasted only 8 months and was smaller in scale that what we’re currently experiencing. The brunt of the effects of this current drought will not be seen until spring 2013. If we have a generally early winter and or late spring, effects could change dramatically. For now, expect the effects to work their way through the feed, animal, wholesale, and finally retail pricing with a likely minimum rise of 4 percent in food prices by December and an additional increase of about the same in early 2013, which will be substantially higher if the drought worsens and will be more rapid (2-3 time more) than overall U.S. inflation. If air temperatures rise to 97-100 degrees for 7-10 consecutive days, most of the current crops will be totally destroyed, which will greatly worsen the conditions and outcomes stated above. Internationally, the worst-case scenario could be catastrophic since more than 100 countries depend on our Midwest U.S. food production. If you are investing in the stock market I would invest long-term in exchange traded funds (ETF’s) in this order –> food –> water –> energy.