The worst drought to hit the U.S. Midwest since 1988 continues, with a seven-mile stretch of the Ohio River (north of its intersection with the Mississippi River) closed recently due to low water levels. Parts of both rivers have become virtual sandbars, delaying commercial traffic and construction projects in the area.

In addition, higher transportation costs could possibly make agricultural products too expensive for some international markets.

The drought has primarily affected parts of Illinois, Missouri and Wisconsin, drying up wells, causing insect infestations and devastating crop production. A government report confirmed that corn production in Illinois (second biggest producer after Iowa) would be down 12 percent this year from 2004’s record. In fact, the U.S. Department of Agriculture expects corn yields to be lower this year in 29 of 33 producing states. Soybean yields are also lower this year.

Can the U.S. economy afford such significant drops in agriculture production? This comes at a time when American car companies are being decimated by foreign competitors, debt levels remain at an all-time high, and the price of oil continues to rise.

Source: The New York Times; Drought Monitor