(Bloomberg Opinion) -- American farmers just can’t catch a break.
With the U.S. agricultural sector facing its worst downturn since the 1980s and record debt levels, there’s been one glimmer of hope at the end of the tunnel: that an imminent end to the U.S.-China trade war would see Beijing gorge on farm products, providing the revenue to help repay all those borrowings.
Floodwaters are washing away that dream.
Spring floods this month have inundated a swath of the U.S. grain belt from Nebraska to Iowa, causing an estimated $3 billion of damage. The rising waters have wrecked grain elevators and the makeshift storage bins farmers have been using to accommodate 2018’s record crop.
There could be worse to come. About three-quarters of U.S. corn and soybeans in storage are in states around the upper Mississippi-Missouri basins, where the National Oceanic and Atmospheric Administration expects to see major flooding through May as spring rain and melting snow exceed rivers' capacities. Overall, about $76 billion of corn and soybeans alone have been set aside, according to the Farm Bureau, a lobby group.
As of Dec. 1, about 60 percent of stored corn could be found in the states of Iowa, Nebraska, Illinois and Minnesota alone, according to the U.S. Department of Agriculture. The first two have been worst-hit by the recent weather, and just under half of the country’s soybeans in storage are in the same four states.
Futures markets have also been encouraging farmers to wait for better times. The spread between March and May contracts for soybeans and corn is at its widest in more than two years, a trend that started when the last planting season ended in June. That steepening futures curve, just as China eases an unofficial trade-war boycott, has been a strong incentive to hold onto crops for a few more months and sell at a better price.
Grain that’s been touched by floodwaters is considered contaminated and has to be destroyed, but even crops stored on higher ground could face problems.
Most U.S. Midwestern crops leave the country via barges on the Mississippi. Rising floodwaters can make the river hard to navigate, or even stop movements altogether when the water is high enough to block passage under bridges. Unloadings of grain barges at New Orleans hit their lowest level in three years this month. Anyone looking to sell their crops under a futures contract better be sure they’re in a position to deliver. Farmers’ season from hell isn’t over yet.
To contact the editor responsible for this story: Rachel Rosenthal at rrosenthal21@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.
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