How Will The Drought Effect Manufacturing

Although manufacturing store fixtures isn’t directly effected by the severe drought throughout the United States, we certainly are impacted indirectly.  While the drought is causing havoc on corn farmers who supply corn crops for ethanol which supply’s about 10% to our U.S. Gas Supply, we soon will feel the ripple effects from the extremely dry conditions.  Using some basic economic principles I will show you how we too will be affected, and how consumers will be affected as well.

While sources suggest a spike of nearly 15 cents a gallon in the months to come, and currently recording record high prices for corn, consumers can anticipate paying more for many items that are derived from corn or need corn to be produced.  With the increase in costs for food along with fuel increases, it will decrease expendable income.  Since manufacturing store fixtures is based off of consumers expendable income in buying non necessity items from retailers, if retailers are negatively affected they too will pull back spending on capital improvements.

Since the Supply of corn is low, and the Demand is remaining constant, Price is bound to increase.  Unfortunately, when commodities increase in price and cost of living remains constant, unless someone strikes rich, the expendable income decreases, and consumer confidence often falls as well.  Since Consumer Confidence can quickly slide, with a slow trek back upward, it is crucial we pay close attention to this drought crisis.

With manufacturing having been hit hard over the past 5 years with the recession, this drought I fear could be a final blow to many.  Since many manufacturers have been holding on by threads for some period of time, it would be no surprise if the drought doesn’t cause some manufacturers to go out of business.

Since Manufacturing is a staple to the well being of our U.S. Economy we ALL should be concerned about the drought, and will be affected by its wrath.  Unlike a Hurricane, Tornado, Fire, Earthquake, Tsunami, etc, which occur leaving a disaster zone in a specific area, this drought will affect our entire nation and should be taken very seriously.

So, although Manufacturers won’t be directly affected by the drought, I hope you can now see how we will be affected indirectly and the severity of this natural disaster.  For the unforeseen rain storm I hope it floods the crops with the necessary water to help provide healthy corn crops, and that we bounce back quickly stabilizing commodity prices, which will help stimulate economic growth.                    

Source: Martha White – www.MSNBC.com -

http://bottomline.msnbc.msn.com/_news/2012/07/19/12834892-gas-prices-may-go-up-too-because-of-drought?lite