Being from an area not particularly impacted by the drought of 2012 I am sympathetic to farmers and ranchers who are impacted. While it is part of farming, it is never fun to see crops you have worked so hard for wither in the field. Likewise ranchers with their animals struggling to find something to eat and drink when normally they would be on their own for the summer. As we go into the fall, unfortunately the damage is done. Cattle and pigs are headed for slaughter because at $8.00/ bushel it is just too costly to feed them corn to fatten them up. This will impact the food chain across the board and not for the good. The good part of this scenario is that with high prices in the Spring many farmers planted way more than a typical normal year. This additional acreage in production may somewhat offset the looses in the drought areas. We will have to seewhat happens at harvest. One thing is sure. This entire system gives us a lesson in Economics 101. As supply drops and demand remains the same the price will increase. Prices will continue to increase until one of two things happen. Either the price gets so high that people stop buying which reduces demand or the high price brings on additional supply from foreign sources which will mitigate further increases. Either way the market will act in a way that both rations supply and increases supply on the one hand or reduces demand as buyers find alternatives that are cheaper on the other.
This process works in virtually any market. In my area the gasoline price is approaching $4.00/gal. Up to that point, I have noticed that people continue to fill up and while they bitch, they don't change their behavior. At $4.00, something happens. People begin to change their habits. They no longer fill up, rather get $20 or $40 and hope the price goes down. If and when the price drops $.15 or $.20 they swarm to the station to fill up. I do it too. If I think the price will continue up I fill up. If I think it has peaked and likely will come down, I get $20. My own form of rationing. High prices cure high prices.
This process works in virtually any market. In my area the gasoline price is approaching $4.00/gal. Up to that point, I have noticed that people continue to fill up and while they bitch, they don't change their behavior. At $4.00, something happens. People begin to change their habits. They no longer fill up, rather get $20 or $40 and hope the price goes down. If and when the price drops $.15 or $.20 they swarm to the station to fill up. I do it too. If I think the price will continue up I fill up. If I think it has peaked and likely will come down, I get $20. My own form of rationing. High prices cure high prices.
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