Floods Deal a New Blow to the Farm Belt
Date: Thursday, March 28, 2019
Source: The Wall Street Journal
Farmers, agricultural companies face losses as water swamps fields and transit networks
Severe flooding in the Midwest is damaging fields, disrupting shipments and dealing a costly blow to growers and agribusinesses as a downturn in the farm economy stretches into a sixth year.
Swollen rivers in Nebraska, Iowa and other states after months of heavy snow and rain have swamped grain bins and washed away cattle. The deluge has impeded crop shipments for U.S. grain traders and inundated roads and rail lines that companies including Hormel Foods Corp. HRL +0.77% and Tyson Foods Inc. TSN +1.65% use to move meat.
Grain-trading giant Archer Daniels Midland Co. ADM +0.35% said Monday that flooding and punishing winter weather would cut its first-quarter operating profit by up to $60 million. The Chicago-based company idled a facility in Columbus, Neb., that makes products including ethanol for 24 hours last week after floodwaters swamped a nearby rail line.
“We won’t be able to resume normal operations until full rail service is back up and running,” said Chris Cuddy, president of the ADM unit that oversees grain-milling operations.
The plant’s reduced operations have meant lower demand for corn from farmers like Dan Wesely, depriving him of income to run his fifth-generation farm.
“It’s another weight,” Mr. Wesely said. “Farmers take risks all the time, but it just adds one more thing.”
The deferred corn sales will tighten Mr. Wesely’s budget as he and other U.S. farmers navigate the steepest agricultural slump since the 1980s. Low prices for corn, soybeans and other farm goods have pressured farm incomes in recent years and boosted farm debt to the highest level in decades.
Bankruptcy filings are rising throughout much of the Midwest, and ongoing trade disputes with big customers for U.S. agricultural commodities like China are deepening anxiety across the Farm Belt.
Mr. Wesely must wait for his fields to dry out before planting corn and soybeans this spring. Some farmers won’t be able to plant at all. More flooding is forecast across the Midwest over the next two months.
Flooding also has caused disruptions for big meat companies. Tyson, the largest U.S. meatpacker, said road closures in flooded regions were forcing the company’s delivery trucks to take detours, though its processing plants are running normally. Hormel said floodwaters had disrupted operations at a supplier’s Nebraska plant that is working to return to full capacity. Damage to cold-storage warehouses and regional infrastructure is causing delays loading its trucks and railcars, Hormel said.
High water also is hindering the flow of crops from farms to U.S. export terminals, slowing barge traffic on the Mississippi River and limiting port operations. ADM said its barge transportation volumes are down significantly from years prior.
CHS Inc., the largest U.S. farmer cooperative, said a Minnesota facility that would typically be loading barges with grain by now likely won’t be operational until May because of high water.
“It’s not ideal from a financial perspective,” said John Griffith, head of global grain marketing for CHS.
CHS said northbound barges carrying fertilizer that it sells to farmers also have been delayed, creating logjams across the entire agricultural supply chain.
Green Plains Inc., one of the largest U.S. ethanol producers, is storing the corn-based fuel in railcars at facilities where floods have impeded rail lines that carry it away from plants. Chief Executive Todd Becker said some plants could interrupt or slow production if rail service doesn’t resume by the end of this week.
“At this point we’re just hoping for the best,” Mr. Becker said.