Monday, July 06, 2015 08:19pm
North Adams, MA now: 75 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
LOG IN | REGISTER NOW   

Home About Archives RSS Feed
The Independent Investor: The Drought of 2012
By Bill Schmick On: 05:21PM / Thursday July 19, 2012
All you need do is look out your window to understand that a drought has descended upon our region. Aside from yellow lawns and possibly local restrictions on watering your grass, most of us here in the Northeast haven't felt its real impact — yet.

Naturally, those who farm for a living would beg to differ since they are watching their livelihood shrivel on the stalk or vine daily and if the dry spell keeps up they too will join the ranks of a growing list of U.S. counties (over a thousand today) that are applying for federal disaster relief.

Over 60 percent of the country is in the grip of the worst drought "since the late 1950s," as the media is billing this weather event. And as droughts go, "you ain't seen nothin' yet." In the '50s, for example, the state of Texas suffered a seven-year dry spell that was so bad that children born in 1951 grew up with no knowledge of rain. Dust storms that turned day into night were so powerful that they stripped the paint off of license plates.

Of course, nothing in modern-day American history compares to the drought of the 1930s. As the new decade began, the country was still grabbling with the aftermath of the 1929 stock market crash. At the same time, the U.S. experienced two dry years in a row in 1930-31, especially in the East. As the economy faltered so did the rain and by 1934, 80 percent of the country was in a drought and a depression.

Anyone who has read Steinbeck's "Grapes of Wrath" has a general idea of how bad a drought can get. Scientists believe the period of 1933-1940 was the worst drought in North America in 300 years. Dust storms, especially in the Great Plains, were daily events and by 1934 it was estimated that 100 million acres of farmland had lost most or all of the topsoil to the winds.

It was at that time, after weeks of storms that the mother of all dust storms hit the nation (Black Sunday, April 14, 1935). Sixty mph winds spread the grit and dust from the Great Plains all the way to Washington, D.C. The term "Dust Bowl" was coined a day later by the Associated Press to describe conditions in the Great Plains. I provide this history lesson for a reason.

History often rhymes. There are some similarities in both the economy and the weather today compared to the 1930s. We experienced a crash in the markets in 2008-2009 brought about by speculation and a credit crisis and are still struggling with the aftermath just like we did in 1929-1930. Today, like then, we worry over this country's huge deficit, out-of-control spending, high unemployment rate and slowing economy. Events are eerily similar to what transpired in the U.S. in the early '30s.

Droughts cause dislocations in the economy whenever they occur. They exasperate existing economic conditions. In this country if you look at the pattern of 20th-century droughts, they normally occur every 20 years, so we are overdue for this dry season. Aside from the predictable impact on food prices, droughts create a chain of cascading secondary effects from lost agricultural jobs and businesses to higher utility costs and other industry costs in the developed world to population displacements and political unrest in emerging markets.

If one looks at just the price of corn in the United States, which has increased in price by 38 percent since June 1, it is not hard to predict increases in processed food prices by the winter. Since other staples, like soybeans and wheat, are also wilting in the heat there could be a domino effect across the board for all kinds of agricultural products.

It might surprise you, however, that the prices of beef, poultry and pork might actually decline in the short term. That's because livestock producers would rather send their herds to slaughter now than face the increased costs of feeding them in the future. Out West, (today's potential Dust Bowl) many ranchers have simply run out of range land that could support their herds. As this new supply of livestock is dumped on the market, prices should ease a bit before heading up, so plan accordingly.  The best strategy would be to stock up now and freeze for the future.

I guess the best that can be said of this drought is that it has a way to run before it can compare to the worst that Mother Nature has thrown at us in the last century. It will most certainly cause more drag on the economy, increase the deficit through federal relief assistance to farmers and put pressure on the unemployment rate.

Under that scenario, is it any wonder that the markets are expecting more stimulus from the Fed? Barring that, I guess we should all brush up on our rain dancing.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or e-mail him at wschmick@fairpoint.net . Visit www.afewdollarsmore.com for more of Bill's insights.




0 Comments
     
News Headlines
Berkshire Bank Completes Company-Wide Week of Service
PGA Junior Series Returns to Taconic
UCP to Host 17th Annual Golf Tournament Fundraiser
Tanglewood Picnic Book Seeing 'Amazing' Success
Waubeeka, MCLA Earn Narrow Wins in Giorgi League
Lanesborough 12-Year-Olds Reach State Final
Brien Center Management, Union Reach Deal to Avert Strike
Steinmann Pitches Pittsfield 13s Past North Adams
Great Barrington All-Stars Top Lanesborough Bulldogs
SteepleCats Blanked on July 4 Fireworks Night

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (172)
Independent Investor (234)
Archives:
June 2015 (7)
May 2015 (6)
April 2015 (8)
March 2015 (6)
February 2015 (7)
January 2015 (9)
December 2014 (7)
November 2014 (4)
October 2014 (9)
September 2014 (5)
August 2014 (7)
July 2014 (2)
Tags:
Markets Interest Rates Election Congress Fed Stocks Europe Metals Housing Economy Debt Ceiling Energy Jobs Euro Rally Oil Federal Reserve Crisis Stock Market Bailout Europe Deficit Fiscal Cliff Currency Banks Commodities Debt Recession Selloff Pullback Greece Japan Retirement Stimulus Taxes
Popular Entries:
The Independent Investor: Don't Fight the Fed
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: QE II Supports the Markets
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
Recent Entries:
The Independent Investor: Tiny Houses Gain Appeal
@theMarket: From Russia With love
The Independent Investor: Robo-Advisers Have Landed
@theMarket: Don't Try to Trade This Market
The Independent Investor: Why Interest Rates Are Moving Higher
@theMarket: Too Hot or Too Cold
The Independent Investor: How to Run for President and Make a Fortune
The Independent Investor: Man's Most Expensive Friend
@theMarket: June Is Off the Table
The Independent Investor: Will Memorial Day Kick Off a Strong Summer?


Sheep Hill Firefly Hike
Children and parents enjoyed a hike through the Sheep Hill...
Williamstown July 4 Parade
Williamstown celebrates its 250th anniversary with the...
Pittsfield 4th of July Parade...
The annual Pittsfield Fourth of July Parade marched down...
Solid Sound Day Three
Solid Sound concluded Sunday with performances from the...
Solid Sound Day Two
Saturday's performances at Solid Sound included NRBQ,...
Solid Sound Day One
Solid Sound gates opened at 4:30 and concert goers enjoyed...
Colegrove Park School Tour
School and city officials toured the far-from-completion...
Down Street Art 2015 Kickoff
Down Street Art kicked off Thursday night with music, food,...
High School Softball All-Star...
High school softball players from throughout the county...
Bashevkin Farewell Party
Nearly 100 staff, friends, family and partners of the...
Little League Championship...
Hunter Sarkis and Logan Briggs Tuesday evening singled...
Candlelight Vigil for S.C....
More than 300 residents gathered at United Methodist Church...
Central/South Relay for Life...
Hundreds spent Friday night and Saturday morning walking...
'Amazing' Book Launch Party
Hundreds turned out for the release of Ty Allan Jackson's...
Third Thursday June 2015
Third Thursday in Pittsfield brought thousands to North...
Bruins Rally At Cheshire...
The Boston Bruins held a rally for Cheshire Elementary...
Sheep Hill Firefly Hike
Children and parents enjoyed a hike through the Sheep Hill...
Williamstown July 4 Parade
Williamstown celebrates its 250th anniversary with the...
Pittsfield 4th of July Parade...
The annual Pittsfield Fourth of July Parade marched down...
Solid Sound Day Three
Solid Sound concluded Sunday with performances from the...
Solid Sound Day Two
Saturday's performances at Solid Sound included NRBQ,...
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings |
Advertise | Recommend This Page | Help Contact Us
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2012 Boxcar Media LLC - All rights reserved

Privacy Policy| User Agreement