For weeks I have been following the drought in California.
You see, California is the eighth largest economy in the world and the largest agricultural state in the United States. They grow everything from soup to nuts.
For years, California has spent billions of dollars litigating water issues and existing reservoirs, preventing new reservoirs, protecting delta smelt and snail darters while assuming that water would remain relatively plentiful. Their lack of water and a burgeoning population is a big, big deal. So this drought is a huge problem- not just for them but for the rest of us as well.
On a side note, while living in California on five acres near Santa Ynez a few years ago, the monthly water bill was just shy of 900 bucks a month. I am not making that up nor did we use that much water. I nearly had an aneurysm when I saw the first bill.
Cattle futures and prices are already peaking because California doesn't have the water to grow feed. Dairy herds are shrinking. The federal government has already stepped in and told California farmers that water shares are not available for the first time in 50 years. http://www.zerohedge.com/news/2014-02-21/feds-withhold-water-california-farmers-first-time-54-years
For the rest of the nation's farmers and ranchers, this could be an excellent year. Taking the California supply offline is going to present a myriad of opportunities for everyone outside the desert southwest. It is also going to cause food prices to rise dramatically as farmers scramble to fill voids in the supply chain.
Fortunately our government doesn't price in food inflation. They pretend it doesn't exist when they calculate the CPI every month and present their "gerry-rigged" numbers to us low functioning sheep.
Could the California drought kick off a tremendous inflationary episode? Yes, I think it's possible- especially if the drought extends a few years or the drought area enlarges.
If that happens- Californians might do well to follow the advice of the late Sam Kinison on world hunger. Behold one of the funniest clips I have ever had the privilege of viewing: