Storm Delivers Latest Blow to Farm Economy as Elevators Shut
(Bloomberg) -- America’s agricultural economy is bracing for yet another hit as Tropical Storm Barry barrels toward Louisiana, with grain elevators, cotton fields and cane crops in its projected path.
Cargill Inc., an agribusiness giant and America’s largest closely held company, said it shuttered its Louisiana export grain elevators on Thursday in anticipation of the storm. The Gulf of Mexico is a key region for U.S. agriculture exports, with almost half of this year’s grain shipments loading along the Mississippi River, government inspections data show. The state is also home to corn, sorghum and soybean crops.
Mother Nature has been merciless to American farmers this year. Incessant rains have washed out farms, flooded rural Midwestern towns and waterways, hampering the flow of agricultural products and hindered plantings in the first half of 2019. The weather woes come as crop prices have stayed depressed amid the U.S.-China trade war and hefty supply gluts.
The industry’s wrestling with “very late plantings, the latest we’ve had certainly for corn, and you follow that too with the weather,” Cargill Chief Financial Officer David Dines said in a telephone interview Thursday. “It’s a challenging time. We’ve navigated it relatively well. But for example, we’ve had to close down two facilities to get ready for Tropical Storm Barry that’s coming. In some ways, it may be more acute this year.”
Climate change has brought increased risks to agriculture from floods, storms, drought and heat. While America’s crop belt suffered from a deluge, wheat growers in parts of Europe have had to deal with scorching temperatures and dry conditions.
In Louisiana, local prices signal the market is positioning for supply disruptions from the storm as shipping is grinding to a halt along the southern reaches of the Mississippi River. The soybean basis in the Gulf jumped 5.3% on Thursday, the steepest climb since June 7, to 50 cents a bushel, U.S. Department of Agriculture data show. The figure measures the amount above futures that buyers are willing to pay.
Prices for soybeans at elevators in New Orleans climbed a fourth straight day, the longest streak since June 17.
Cotton plants in the southern portions of the Mississippi Delta region could be badly affected by the storm, according to Don Keeney, a senior agricultural meteorologist with Maxar in Gaithersburg, Maryland. Sugar cane is also likely to get serious damage from flooding, while corn may face “a little bit of wind damage,” he said.
Arkansas, Louisiana and Mississippi -- each of which are in Barry’s path -- accounted for most of the rice grown in the U.S. last year. In top-producer Arkansas, heavy rain expected to arrive by Sunday could disrupt crop development, Jarrod Hardke, an agronomist at the University of Arkansas, said. Rice crops already were struggling after rains delayed spring plantings and then were hit with high temperatures.
Cushion the Blow
The impact on futures markets could be limited, though. There’s plenty of U.S. cotton in inventory that can help cushion the blow of supply loss, and the region is not a major global supplier of sugar and corn.
Still, U.S. cotton plantings have already been hampered by wet conditions this year, and storms present an additional threat, Michael Deliberto, an agricultural professor at Louisiana State University in Baton Rouge, said by email.
What’s more, since crops are still in early development stages and pretty far from being ready to harvest, there’s little farmers can do to prevent damage except make sure that their drainage systems are open and that any equipment is on high ground, said Kyle McCann, assistant to the president of the Louisiana Farm Bureau.
(Updates with comment on rice crops)
--With assistance from Kevin Varley, Shruti Date Singh and Michael Hirtzer.
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