The issue is that drought in California threatens to exacerbate food supply shortages in other parts of the world as higher US prices shift production and supply towards satisfying US demand: Supply shortfalls are met by higher prices. We already see markets are beginning to reflect this: The February 2014 Live Cattle futures contract on the Chicago Mercantile Exchange appreciated 9.5%, meaning there was either an increased demand or weakening supply. The implication of this is the possibility of global food price inflation. A Bloomberg report cites that the drought’s impact on overall agriculture production could amount to losses of $1.6 billion and approach $5 billion for California farms and the agriculture industry in general.
Importantly, this is an issue because California, notably the Central Valley, is especially vulnerable to wildfires (as evidenced by the recent news). In California alone, more than 4,600 fires have affected over 306,000 acres of state and federal land between January and August of 2016, those being well above the state’s average according to Cal Fire. Corroborating that, the federal National Interagency Fire Center reported that California had the greatest number, size, and intensity of wildfires in Western states. Furthermore, the U.S. Forest Service estimated that the number of dead trees, which are fuel for a fire, reached 66 million during four years of drought. Finally, the Agriculture Department division warned of fire seasons that start in March instead of June and last through December instead of ending in September forecasting extended fire-seasons.
Even as California faces an age of increased fires, their agricultural output only continues to increase. While this might be good for the state, one cannot help but wonder what the implication of this, in the long run, will be.
Very relevant post, Tamur. You mentioned how California is increasing output even as the number of environmental disasters increase, and it seems to me that we are simply ignoring the problem, hoping that it won't affect us too much, rather than dealing with the issue. California is avoiding addressing the issue in much the same way that our President is avoiding the truth by refusing to accept the recent climate study conducted by 13 agencies within his administration. If there's an economic theme within all of this, it is that the long run costs of ignoring the problem are catastrophic, yet we are blinded by the high short run costs of taking action. It's as if we think that if we ignore it and just keep doing our thing, we can wait it out. Well, guess what? Our generation has to deal with the issue now, and it's only getting worse. You mentioned losses in the billions when you discussed production cuts and demand increases. Well, if we keep ignoring the issue of global warming, the global losses could reach the trillions. Not only that, but there could be priceless costs in the form of human lives lost. The time has come for us to take action, at the very least because the economic costs outweigh the benefits of ignoring the problem. We've waited long enough. It's time to act.
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