Farmers who entered 1988 without inventories and experienced crop failure will bear most of the financial hardship resulting from the 1988 drought. Federal drought assistance will partially ameliorate these losses. Some farmers can maintain 1988 cash income by selling crop inventories at drought-induced higher prices. Most agricultural input and processing industries will be only mildly affected. Low stream-flow on the Mississippi River system caused grain transportation problems in late spring and early summer. The overall effect of the drought on the U.S. economy will be small, but some farming-dependent rural communities will experience substantial reductions in total business activity.