Agri Business

Up to their waists in water, US farmers face crucial decisions

Bloomberg March 29 | Updated on March 29, 2019 Published on March 29, 2019

Floodwaters surround corn sitting under a collapsed grain bin in Pacific Junction, Iowa, US. . The deluge that devastated so much of the Midwest over the last week could be a preview for one of the worst years for flooding in the US, according to federal weather officials Bloomberg   -  Bloomberg

For American farmers already struggling to navigate the US-China trade war, optimism for the spring planting season is washing away.

Floods from the Mississippi Delta to the Dakotas have inundated roads and submerged fields just as Midwestern farmers should be preparing the soil to sow this year’s seeds. If land is inaccessible much longer, growers will be forced to shift their planting decisions — likely leading to more soyabeans, the crop hit hardest by a drop in Chinese demand.

“It’s causing a lot of stress,” said Dan Nerud, who farms 2,600 acres of corn and soyabeans in Nebraska with his son. Some of his land was under as much as four feet of water, while other areas are so saturated that walking or towing a planter with a tractor would mean sinking deep into mud.

Bad timing

The timing could hardly be worse for farmers who had been trying to figure out which mix of crops would yield the most profit as trade tensions drag on. President Donald Trump’s tit-for-tat tariffs with China, historically one of the biggest customers for US agricultural goods, has roiled a market already depressed by years of ballooning supplies. Growers, waiting for sales to recover, are sitting on record inventories of soyabeans packed away in silos and grain bags.

The storm deluge means that at least some of those oilseeds and stored grains may have been destroyed.

‘Huge Impact’

Nebraska, among the hardest-hit States, is estimating $440 million in crop losses from flooding. “That includes transportation costs, grain ruined in storage and planting delays,” according to Governor Pete Ricketts. “Another $400 million in livestock is expected to be lost from the recent rains and a blizzard earlier this month,” he said.

That’s limiting the options farmers have in choosing between corn or soyabeans, the nation’s two largest crops. They are often planted on side-by-side fields and compete for acreage.

“Despite the trade tensions, soyabeans may win some acres that weren’t expected just months ago. The short fall season robbed farmers of enough time to apply nitrogen-based fertiliser that’s necessary for corn, and the storms have narrowed the application window this spring,” said Alexis Maxwell, research director of Green Markets, a fertiliser research firm.

As of last week, soyabean acres were expected to fall by about 3 per cent to 86.2 million this year, while corn acres would rise 2.4 per cent to 91.3 million acres, according to a Bloomberg survey of analysts.

Changing Expectations

“The floods are absolutely devastating for those affected but likely won’t have a significant impact on overall market prices,” Ed Prosser, vice president of commodity risk management at grain handler Scoular Cosaid. More important “will be timing of when producers can get their fall crops planted. Fast means more corn, slow means more soyabeans.”

Nebraska farmer Brandon Hunnicutt had planned to sow about 5 per cent more corn this year at the expense of soyabeans in his fields near the village of Giltner. His farm was largely spared from damaging floodwaters, but with fields still saturated, he doesn’t know if he will be able to plant all of his seeds this spring.

“The math may not be too bad for soyabean planters, regardless of the weather. Even as tariffs have walloped exports of the oilseed, the price ratio between the two commodities only slightly favours corn,” said Corey Jorgenson, President of The Andersons Inc’s grain unit. Soyabeans have rebounded somewhat as China made goodwill purchases during the trade talks.

Published on March 29, 2019
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