Weather impacts on economy

THE THRIFT SAVINGS PLAN ALLOCATION GUIDE Forums Message Board Weather impacts on economy

This topic contains 6 replies, has 2 voices, and was last updated by  TS Paul 5 years, 5 months ago.

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    First of all, I want to thank Paul for providing such important information on managing our TSPs in such a concise and easy-to-understand manner.

    As an employee of the USDA, I work with California farmers to implement resource conservation practices in the farming operations. California is experiencing the most severe drought in its history, and we’re already witnessing its devasting effects on our multi-billion dollar ag industry.

    Due to the shortage of water, farmers have no choice but to fallow (not plant) their annual crops, therefore are losing an entire production year. Worse off are those with orchards and vineyards (over a million acres combined). With little available groundwater, those growers are facing the loss of their trees and vines, which typically take up to 4 years to produce a marketable yield after replanting.

    Not only are the farmers and the agricultural economy being devasted by the drought, the impact on food costs will be nation- and possibly world-wide.

    With the eastern and southeastern US bearing the financial burden of record low temperatures and snowfall, the US economy is under a grave threat from the weather this year.

    My question is: have you (or is anyone) factoring the economic impacts of our current weather pattern on the stock market in either the near future or later this year when the ramifications of the western drought will be felt by everyone?

    Have you ever researched the market impacts of poor agricultural production in past downturns?

    As I near retirement, I’m feeling increasingly paranoid about another market crash, yet hate to miss out on the opportunity for my TSP to grow. I’ve already begun moving a greater percentage of my money into the G fund, but when I saw today’s stock market news, I groaned over the money I could have made had I left my distribution alone.

    I welcome both your perspective on the current weather crisis as well as recommendations for my situation (as well as others in my position).



    TS Paul

    Thanks very much for posting the great question. I don’t know why people are shy about posting on here, but for every question on the message board, I get about 20 emails.

    I’d mostly ignored the weather back East as an issue because Spring has to come and no matter how severe the winter was I didn’t think it would impact the business cycle. I believe that the severe weather can certainly cause some of our indicators to be skewed for a month or two as we see worse job numbers, higher fuel costs, and lower productivity, but the underlying improvements in the economy will continue.

    With respect to the impact on agriculture, I have been aware of talk about some crops being impacted by the drought, but hadn’t considered it as potentially impacting the economy in a measurable way. It could certainly be that I’m just not aware of the magnitude of the problem and this could have a significant impact on the economy. I have not done any research on the past impact of poor agricultural production – the example which jumps to mind is the 1930’s Dust Bowl, but of course that took place during the Great Depression and during a time when farm to market was usually measured in counties rather than time zones so I’m not sure there are lessons for today in that event.

    My gut reaction is that even a widespread drought related shortage of some crops would not be enough to really throw the economy off course. My faith in markets may be misplaced, but my sense is that both corporations and consumers would adjust, finding alternative sources or substituting goods which were not impacted as much. Prices would rise overall, but not enough to cause the economy to contract. But it certainly bears exploring and watching in the future. I’ll have to set a few new Google alerts so I start reading what other folks are thinking on this issue.

    And you are definitely our expert on the impact which the droughts are having, so please do push more data as you come across it and hopefully one of the sharp minds on here will be able to make some judgements.

    Thanks very much for all the kind words. Please do share the site with your colleagues if you get a chance.



    Thanks for your response.

    I don’t have much to add at this point (need to set aside some time to research actual numbers), but here are a couple of recent articles on the drought and both current and potential economic impacts.


    What I see as someone affiliated with the ag industry are huge numbers of panicked farmers and ranchers who have no water for their crops or their liveststock. California is one of the largest dairy and beef production states – no water not only means no water for the livestock, but no water to grow the grass, hay, and grain for the livestock.

    I think the impacts of this drought on what is arguably the 10th-12th largest economy in the WORLD are something that might have a far greater ripple effect than most analysts realize.



    Sorry – I didn’t realize the first link I posted was incomplete until after I hit ‘submit’ (wish there was an edit function – then I could fix the typos I invariably spot after I’ve posted! 🙂 )

    Anyhow, here is the complete link:



    Hi Paul,

    Here’s an interesting update to the economic impacts of the drought situation in California:



    An analysis of the economic impacts (positive and negative) of this year’s weather:


    TS Paul

    It is interesting that the impact on crops really hasn’t gotten much play in the press yet. I’m inclined to believe it is just too complicated an issue with way too many variables, so most “financial” writers will stick to the easy stories they have written a dozen times before instead of treading new ground. I still lean towards it having a negligible impact on our Thrift Savings Plan balances, but it will be interesting to see how the financial press reacts if food prices start spiking up.

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