Disasters like flooding affect the economy of a place in many ways. Floods destroy infrastructure that people have built and the products they have already harvested. They also interrupt normal production as well as commercial activities (Mattoon, Para. 2). Flooded roads restrict movement and therefore affect market accessibility.
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The June 2008 flooding in the United States of America affected its central states, cutting through the Corn Belt. The states that the flood affected most include Illinois, Indiana, Iowa, Missouri, South Dakota, Wisconsin, Kansas, Michigan, Minnesota, Nebraska and Oklahoma (Hayes, pg. iv) This had a great impact on the economy of this country and affected the behavior of the markets.
Flooding as an economic disaster has a direct impact on agricultural markets. Heavy floods have an influence in the availability of agricultural commodities for the markets. They can either destroy the already harvested produce or destroy the agricultural produce while in the fields.
They also make accessibility to the market difficult. In this case, the floods affect the demand and supply of agricultural produce to the agricultural markets. Low or no agricultural production of specific commodities is likely to lead to decrease in supply to the markets and hence high demand of such commodities and/or substitute commodities. As the law of demand and supply asserts, the decline in commodity supply will lead to increase in its prices (Kub, Para. 12).
For example in the June 2008 flood in America, about five million acres of land under crop production received direct flood destruction. This meant either total loss of crops in some areas and reduced yields in other areas (“CRS Report for congress”, pg. 2). As a result, the prices of commodities, especially corn and soybean, rose drastically in late June and early July.
Flooding affects the markets of Corn, soybean, wheat, farm animals and other foodstuffs even though the production of these commodities does not occur in the area affected by the flood. This is because the markets of these products sometimes stretch far beyond the boundaries of the production area.
The associated markets are also likely to face a direct impact from the flooding. For example, the livestock that depend on feed from the corn, wheat and soybean straw will experience scarcity of these feeds. This will lead to seeking of alternatives, which will also be of high price due to increased demand. Agricultural farm inputs like seeds and fertilizers will be in low demand until the situation normalizes.
This will automatically reduce the market economy of these commodities. Flooding in this case causes a demand and supply shock. Due to reduced output and destruction of produce, the affected place experiences a decline in supply thus experiencing a negative supply shock. The temporary decline in available goods will also create a positive demand shock. This will cause the supply curve to shift to the left as the demand curve shifts to the right. These actions both lead to increase in commodity prices.
Flooding is likely to lead to decline of the Ethanol market. This is because ethanol production depends on the availability of corn (Garber, Para. 6). Less production of corn may bring a crisis on the allocation of this resource to food and ethanol production. In such a case, the policy makers are likely to review the policies which provides for allocation of corn to ethanol production in effort to avert food price inflation (“CRS Report for congress”, pg. 2).
Both the June 2008 floods and the Hurricanes Katrina and Rita caused considerable flooding in various states of America. However, the two hurricanes caused more destruction and loss of life than the June 2008 floods (“Science news”, Para. 1). The hurricane Katrina and its resultant floods claimed the lives of about 1,836 people. The destruction in the June 2008 reached an estimate of $ 5 billion while that from Katrina and Rita combined reached an estimate of about $ 91billion.
There were evacuations in all these disasters but those caused by the hurricanes were intensive as compared to the ones caused by the June 2008 flooding. The National Weather Service had given an accurate prediction to the timing and intensity of the hurricanes (“U.S. House of Representatives”., Pg.2). The markets that the hurricanes affected most were generally food and fuel markets leading to a severe shortage of food, gas and water (Waikar, Para. 2).
Not all the policies enacted for Katrina and Rita have been successful. This is due to low implementation levels and participation of the people and the firms involved. Generally, there has been better preparation to handle better future disasters (U.S. (“Department of Homeland Security”, Para. 25; Walker, Pg. 38).
In conclusion, economic disasters in the United States in the past have caused many losses from materials, infrastructure, human life and money needed to clean up the mess after the disasters. Flooding has been a major economic disaster affecting different types of markets differently.
The National Weather Service station and other concerned companies have providing been the people and the government with the required information and forecast about these disasters. Information flow and willingness, and rate of response by all the involved parties in implementing relevant policies are essential in mitigating the effects of these economic disasters.
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“CRS Report for Congress”. Midwest Floods of 2008: Potential Impact on Agriculture. 2008. Web.
“Department of Homeland Security”. The First Year After Hurricane Katrina: What the Federal Government Did. 2008. Web.
“Science News”. Katrina and Rita One Year Later Ecological Effects of Gulf Coast Hurricanes. Science Daily. 2006. Web.
“U.S. House of Representatives”. A Failure of Initiative. Final Report of the Select Bipartisan Committee to Investigate the Preparation for and Response to Hurricane Katrina. February 15, 2006. Web.
Garber, Kent. Midwest Floods Ruin Crops. 2008. Web.
Hayes, L. John. Service Assessment. Central United States Flooding of June 2008. 2009. Web.
Kub, Elaine. Analyzing the Complex 2008 Corn Crop. 2008. Web.
Matoom, Rick. Assessing the Midwest Floods of 2008 (and 1993). 2008. Web.
Waikar, Guari. Facts about Hurricane Rita. Web.
Walker, M. David. Hurricane Katrina: Gao’s Preliminary Observations Regarding Preparedness, Response, and Recovery. Diane Publishing. March 2006. Print.