November 21, 2016

Growing Drought in the Southeastern United States

In the October 17, 2016 DIVER Commentary, we discussed the impact on people and the broader economic impact of Hurricane Matthew on a significant portion of the Southeastern United States.  This week, we go from the torrential rains associated with that hurricane to the drought conditions subsuming the same part of the country.

In continuing with the theme of special weather events, we mapped drought conditions from October 2015 to October 2016.  While drought conditions remain, though somewhat abated, in the West and Pacific Northwest, severe drought conditions have arisen in the Southeast over the past year.

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Source: DIVER Analytics; National Drought Mitigation Center

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Source: DIVER Analytics; National Drought Mitigation Center

According to the Southeast Climate Center, 40% of the region is under moderate to exceptional drought conditions which began in Spring 2016 and intensified throughout the Summer.  The Louisiana rains that led to Summer flooding, did not move east, and the tropical storms that more recently flooded the East Coast, did not move west.

Known as the Tri-State Area, interior portions of Alabama, Georgia and Tennessee continue to endure a deepening and extreme drought according to the National Drought Migration Center.  The U.S. Drought Monitor has reported that the hardest hit areas in Georgia and Alabama are experiencing levels of dryness comparable to the 62% of California that remains in severe to exceptional drought. The Carolinas and the Lower Mississippi Valley – Mississippi, Louisiana and Arkansas — are also experiencing the negative impact of the expanding drought.  The estimated population in these drought-stricken areas is 20.7 million.

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Source:  U.S. Drought Monitor

Six-month precipitation totals (April-October 2016) that have ranked within the three driest values on record include Chattanooga, TN, Columbus, GA and Macon, GA.  Other areas of significant precipitation deficits include Birmingham and Montgomery, AL.

Competing Demands for Water Use

The lack of water has intensified the decades-long “water wars” between Georgia and Florida which believes that Georgia, especially Atlanta, uses too much water from the Chattahoochee River.  Lake Lanier, a major source of water for Atlanta’s water supply, is 9 feet below its summer pool level.  Wildfires currently rage across Alabama and northwestern Georgia.  On November 17, 2016, the Governor of Alabama declared all 67 counties were under a “No Burn” order, in which all outdoor burning is prohibited.  Previously, 46 Alabama counties were already under a “No Burn” order due to drought emergency conditions.

A Word About the Drought’s Impact on Alabama’s Electricity Generation

Twenty-seven percent of Alabama’s electricity comes from nuclear power.  Nuclear power requires a cooling agent – water.  One-third of the state’s nuclear power comes from the Farley Power plant which sits on the Chattahoochee River. Uninterrupted operations will require a minimum water flow rate sufficient to cool the reactors.  Should the Farley plant require any change in energy production, might that cause a negative economic impact?

The Drought’s Impact on Agriculture and Other Costs

Per the U.S. Drought Monitor, because of this worsening and spreading drought condition, crop farming, particularly corn, cotton, soybeans, peanuts and tobacco have been stressed.  Winter wheat planting has been delayed. Livestock producers have begun supplemental feedings with hay while others have sold cattle.  Alabama and Georgia are recording well-below-normal stream flows which has extended downstream to the Apalachicola River in the Florida Panhandle.  This drought has caused forest fires, threatens water supply and quality, and agricultural production.  Apart from adverse health effects, there will be economic costs, among them, food and energy.  DIVER Geo Scores will merit watching if the drought continues unabated.

Enjoy your week and Happy Thanksgiving,

Anne Ross
Senior Credit Analyst
Lumesis Data Team

2017-10-26T13:38:49+00:00