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The Real Cost of a Sweltering Summer

By Lewis Braham - 2012-07-19T00:21:34Z

Photograph by Phil Hawkins/Bloomberg News

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Short-term cost to U.S. economy

Agriculture makes up about 1.2 percent of U.S. gross domestic product, according to Adolfo Laurenti, deputy chief economist at Mesirow Financial in Chicago. "It may not be big numbers in terms of GDP, but when you look at these Midwestern states, you have everything revolving around agriculture, from banking, machinery and equipment, the warehousing, the transportation." Last year's drought in Texas, during the state's hottest year on record, destroyed $4.4 billion in crops and $3.2 billion in livestock. Over the next four quarters, Michael Swanson, agricultural economist at Wells Fargo & Co., figures "It might be a $50 billion event for the economy as it blends into everything" and food prices advance. Yet with agriculture's modest share of the U.S. economy, a single season's drought might have little lasting impact on the national economy, said Bruce Babcock, an economics professor at Iowa State University in Ames.