Perdue Farms Facility Catches Fire

Rev 6:6 NAS “And I heard something like a voice in the center of the four living creatures saying, “A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not damage the oil and the wine.”

Important Takeaways:

  • Chesapeake Fire responds to industrial fire at Perdue Farms facility
  • A fire took place at Perdue Farms facility in the South Norfolk area of Chesapeake
  • A grain processing and storage facility.
  • When crews arrived they found a large soybean processing tank with flames showing from the top
  • The fire was called under-control at 9:48 p.m. with no injuries reported.
  • Soybean products must now be removed from the tank to verify the fire is completely extinguished.

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Argentina exchange says dry summer poses ‘big challenge’ for soybeans, corn

By Maximilian Heath

BUENOS AIRES (Reuters) -Argentina’s weather outlook poses a “big challenge” for soybean and corn production, with lower-than-normal rainfall due to the La Niña climate pattern expected during the region’s summer, the Buenos Aires grains exchange said.

Argentina is the world’s leading exporter of processed soybeans and the second-largest exporter of corn. Farmers are currently sowing soy and corn for the 2021/22 season.

“We are facing a climatic scenario … that poses strong challenges to production,” the exchange said in its monthly climate report posted late on Monday, adding that “the return of the rains could be delayed until mid-March.”

“One of the most damaging effects caused by ‘La Niña’ in the Pampeana Region (the central farming area) and adjacent areas, is to extend the seasonal drought, which normally takes place during January,” it said.

The Buenos Aires exchange expects a record corn harvest of 57 million tonnes and soybean production of 44 million tonnes. Corn sowing is 39.5% complete and soybeans 56.1% finished.

As for 2021/22 wheat, whose harvest ends in January, the exchange raised its harvest estimate last week to a record 21 million tonnes, although it noted in its report that adverse weather could affect the cereal in the weeks ahead.

Applied Climatology Consultancy (CCA) meteorologist Germán Heinzenknecht agreed that the summer season would be dry, with less-than-normal rainfall but said it may not be as dramatic as feared for crops.

“You have to differentiate between the east and the west. The lack of rain is going to be more severe in the agricultural east,” Heinzenknecht told Reuters on Tuesday.

“I don’t think we will have an ideal summer, but there are going to be damp windows,” Heinzenknecht said.

While La Niña causes dryness in central regions of Argentina, it also increases the level of rainfall in the northern provinces, increasing the risk of extreme storms and flooding in the coming months.

This should also boost rains in southern Brazil, refilling the Paraná River, a key grains waterway that carries some 80% of Argentina’s farm exports to the sea. It hit a 77-year low level earlier this year due to a historic drought upriver, hindering transport.

“This will allow the waterway and river ports to be recovered to a great extent, though this will only take place toward the end of the season,” the Buenos Aires exchange added.

(Reporting by Maximilian Heath; Editing by Lucila Sigal, Paul Simao and Mark Porter)

Iowa farm services firm: systems offline due to cybersecurity incident

By Karl Plume and Christopher Bing

CHICAGO (Reuters) -Iowa-based farm services provider NEW Cooperative Inc said on Monday its systems were offline to contain a “cybersecurity” incident just as the U.S. farm belt gears up for harvest.

The cooperative operates grain storage elevators in the top U.S. corn producing state, buys crops from farmers, sells fertilizer and other chemicals needed to grow crops and owns technology platforms for farmers that provide agronomic advice on the way to maximize their harvests.

“We have proactively taken our systems offline to contain the threat, and we can confirm it has been successfully contained,” NEW Cooperative Inc said in a statement. “We also quickly notified law enforcement and are working closely with data security experts to investigate and remediate the situation.”

Several grain storage elevators operated by NEW Cooperative contacted by Reuters were open.

The timing of the attack is making it crucial that NEW gets their systems back online as soon as possible as many farmers will start their combines this week and begin delivering crops to NEW’s elevators across Iowa, said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.

“They have got you boxed into a corner,” Roose said. “Harvest is right now. This is the week that we are just starting to ramp up harvest, particularly for soybeans.”

Cybersecurity has risen to the top of the agenda for the Biden administration after a series of high-profile attacks on network management company SolarWinds Corp, the Colonial Pipeline’s oil network, meat processing company JBS and software firm Kaseya. The attacks hurt the United States far beyond just the companies hacked, affecting fuel and food supplies.

A spokesperson for the U.S. Cybersecurity and Infrastructure Security Agency declined to comment on the incident at NEW Cooperative.

The Federal Bureau of Investigation did not immediately respond to a request for comment.

“This is a very clear attack on an organization that is part of our critical infrastructure,” said Allan Liska, a senior analyst with U.S. cybersecurity firm Recorded Future. “This could result in disruptions to food delivery in parts of the country.”

A Russian-speaking cybercriminal group named BlackMatter said on its website they had recently stolen data from NEW Cooperative.

BlackMatter is known for using ransomware to threaten their victims with data leaks, often extorting them for a crypto currency payment.

The claim follows a July meeting between U.S. President Joe Biden and Russian President Vladimir Putin, where Biden reportedly told Putin that “critical infrastructure” companies should be off limits to ransomware gangs.

Cybersecurity experts and federal prosecutors say ransomware groups often operate from Russia or Ukraine. The “food and agriculture” industry is publicly defined as a critical infrastructure sector by the Department of Homeland Security.

(Reporting by Karl Plume, Editing by Franklin Paul, David Gregorio and Marguerita Choy)

Trump approves emergency aid for Iowa after storm

(Reuters) – U.S. President Donald Trump on Monday said he approved federal disaster aid for Iowa after a hurricane-force storm hit last week, causing widespread damage in towns and farms and leaving thousands without power.

Iowa Governor Kim Reynolds said on Sunday she requested about $4 billion in emergency funds following the Aug. 10 storm.

The destruction compounded troubles for a U.S. agricultural economy already battered by extreme weather, the U.S.-China trade war and disruptions to labor and food consumption from the COVID-19 pandemic.

“I just approved an emergency declaration for Iowa,” Trump told reporters at the White House before departing on a trip to the Midwest. “It really did a lot of damage,” he said of the storm.

Trump, who is scheduled to speak on Monday in Minnesota and Wisconsin, said he aimed to visit Iowa.

“I’ll be going very soon and maybe today,” he said.

Media reports said the storm caused at least three deaths in Iowa. Winds as high as 100 miles per hour (160 kph) hit eastern Nebraska, Iowa, Wisconsin and parts of Illinois.

The storm impacted 37.7 million acres of farmland across the Midwest, including 14 million in Iowa, the Iowa Soybean Association said on Friday, citing estimates from the U.S. Department of Agriculture.

“I’ve never seen the corn flattened as much as it has from this terrific windstorm,” U.S. Senator Charles Grassley of Iowa told reporters on Monday. “The number of grain bins flattened is humongous.”

The storm affected 58,000 holders of crop-insurance policies with a liability of around $6 billion in Iowa, according to the Iowa Soybean Association.

Grassley said crop insurance covers about 90% of Iowa farmland. It is too early to determine whether there will be enough storage space for the autumn harvest, he said.

(Reporting by Kanishka Singh in Bengaluru; Steve Holland; in Washington; and Tom Polansek in Chicago; Editing by Nick Macfie and Dan Grebler)

China tells state firms to halt purchases of major U.S. farm products: sources

By Hallie Gu, Keith Zhai and Jing Xu

BEIJING/SINGAPORE (Reuters) – China has told state-owned firms to halt purchases of soybeans and pork from the United States, two people familiar with the matter said, after Washington said it would eliminate special treatment for Hong Kong to punish Beijing.

Large volume state purchases of U.S. corn and cotton have also been put on hold, one of the sources said.

China could expand the order to include additional U.S. farm goods if Washington took further action, the people said.

“China has asked main state firms to suspend large scale purchases of major U.S. farm products like soybeans and pork, in response to U.S. reaction to Hong Kong,” the source said.

“Now we will watch and see what the U.S. does next.”

U.S. President Donald Trump said on Friday he was directing his administration to begin the process of eliminating special treatment for Hong Kong, ranging from extradition treatment to export controls, in response to China’s plans to impose new security legislation in the territory.

China is ready to halt imports of more agriculture products from the United States if Washington takes more action on Hong Kong, the sources said.

(GRAPHIC: Value of U.S. agriculture exports to China – https://fingfx.thomsonreuters.com/gfx/ce/yzdvxdxdzvx/USAGExportstoChinaMar2020.png)

Chinese importers have canceled 10,000 to 20,000 tonnes of American pork shipments – equivalent to roughly one week’s orders in recent months – following Trump’s comments on Friday, the source said.

State purchases of bulk volumes of U.S. corn and cotton have also been suspended but the details were not clear.

In a worst-case scenario, if Trump continues to target China, Beijing will have to scrap the Phase 1 trade deal, a second source familiar with the government plan said.

“There’s no way Beijing can buy goods from the U.S. when receiving constant attacks from Trump,” the person said.

China pledged to buy an additional $32 billion worth of U.S. agriculture products over two years above a baseline based on 2017 figures, under the initial trade deal the two countries signed in January.

China has bought soybeans, corn, wheat and soyoil from the United States this year, to fulfill its commitment under the trade deal. Beijing also stepped up purchases of U.S. pork, after the deadly African swine fever decimated its pig herd.

The U.S. Department of Agriculture reported that China bought $1.028 billion worth of soybeans and $691 million of pork in the first quarter of 2020.

Private importers haven’t received a government order to suspend buying of U.S. farm produce, according to a third source with a major trading house, but commercial buyers are very cautious at the moment, the person added.

“A certain scale of trade will be halted,” given rising tensions between China and the U.S. in other areas, but it is not a full stop, said a fourth source familiar with the government plan.

However, China would be able to find other sellers easily (of the farm products), he added.

The sources all declined to be named due to the sensitivity of the matter.

(Reporting by Hallie Gu, Jing Xu in Beijing and Keith Zhai in Singapore; Additional reporting by Dominique Patton, and Gavin Maguire; Editing by Edmund Blair and Susan Fenton)

China buys about 10 cargoes of U.S. soybeans after trade talks

By Karl Plume

CHICAGO (Reuters) – Chinese importers bought about 10 boatloads of U.S. soybeans on Monday following deputy-level trade talks in Washington last week that were overshadowed by the abrupt cancellation of a U.S. farm state visit by Chinese agriculture officials.

The deals for about 600,000 tonnes, slated for shipment from Pacific Northwest export terminals from October to December, were similar in size to a wave of buying earlier this month, two traders with direct knowledge of the deals said.

Benchmark U.S. soybean futures on the Chicago Board of Trade <0#S:> jumped about 1.5% on news of the renewed buying, the market’s steepest rise since Chinese buyers bought a large volume of U.S. soybeans on Sept. 12.

Purchases of U.S. agricultural products like soybeans, the most valuable U.S. farm export, and pork are seen as key to securing a deal to end a bilateral trade war between the United States and China that has lasted more than a year.

A trade deal appeared elusive late last week after Chinese officials unexpectedly canceled a visit to farms in Montana and Nebraska and after U.S. President Donald Trump said that agricultural purchases would not go far enough.

U.S. and Chinese officials have since said that talks went well and plans for high-level talks next month remain on track.

Monday’s soybean deals were among the largest by private Chinese importers since Beijing raised import tariffs by 25% on U.S. soybeans in July 2018 in retaliation for U.S. duties on Chinese goods.

Other soybean purchases over the past year have been made almost exclusively by state-owned Chinese firms which are exempted from the steep import tariffs.

(Reporting by Karl Plume in Chicago; Editing by Matthew Lewis)

Size matters. Big U.S. farms get even bigger amid China trade war

By Mark Weinraub

HAZELTON, N.D. (Reuters) – As the 2018 harvest approached, North Dakota farmer Mike Appert had a problem – too many soybeans and nowhere to put them. Selling was a bad option. Prices were near-decade lows as U.S. President Donald Trump’s trade war with China weighed heavily on the market. Temporary storage would only buy him a little bit of time, particularly in an area where cold weather can damage crops stored in plastic bags.

So Appert, who farms 48,000 acres (19,425 hectares), cut a check for $800,000 to build eight new permanent steel bins. That allowed him to hold onto his bumper crop and wait for prices to recover.

He sold half of the 456,000 bushels stored on his farm throughout the following summer, earning about $1 more per bushel and avoiding storage at nearby CHS elevators or an Archer Daniels Midland Co. processor in the area.

But most farmers do not have $800,000 to spend on steel bins, and many are going under. The number of U.S. farms fell by 12,800 to 2.029 million in 2018, the smallest ever, as the trade war pushes more farmers into retirement or bankruptcy.

Roger Hadley, who farms 1,000 acres in Indiana, was unable to plant any corn and soybeans this year after heavy rains added to farmers’ woes.

He spent most of the summer trying to plant a combination of grasses, a so-called cover crop, so he could apply for government aid and try again next year.

“The guys that got rich are getting richer,” Hadley said. “It has frustrated a lot of guys.”

In farming, size does matter. The farms left standing after the trade war will likely be some of the biggest in the business. Appert’s operations are more than 100 times bigger than the average American farm and the advantages provided by that magnitude are becoming even more critical as the trade war stretches into a second year.

The declining number of U.S. farmers could hurt the world’s top grain merchants such as ADM and Bunge, who will have fewer suppliers. Additionally, farmers will have less need to rent space in the merchants’ grain silos as big farmers like Appert have plentiful storage on their own farms.

ADM said it would continue changing to meet the needs of its customers. Bunge did not respond to an email seeking comment.

By the end of 2018, the average U.S. farm size rose to 443 acres, a 12-year high and up from 441 million in 2017, according to the latest U.S. Department of Agriculture data.

And the biggest farmers are growing their operations even more as retiring farmers choose to lease their land rather than selling it.

When land becomes available for lease, only the biggest farmers can readily shoulder the costs needed to expand.

The size of the loans smaller farmers would need to buy equipment, for example, are too big for applicants with little collateral, said Dave Kusler, president of the Bank of Hazelton in Hazelton, North Dakota.

“It is almost impossible with what the costs are,” Kuslersaid. “In this area, you can’t make a living on 1,000 acres.”

Critics say the Trump administration’s policy of compensating growers for lost sales due to the trade war pays the bigger farm operations more since payments are calculated by acres farmed.

The Environmental Working Group, a conservation organization, said in a recent study the top 1% of aid recipients received an average of more than $180,000 while the bottom 80% were paid less than $5,000 in aid.

Appert said that big farmers receive bigger outright payments but less per acre than small farms because of a $500,000 cap per farm.

‘BOOM, BOOM, BOOM’

Big farms can reap the full benefits of new high-tech equipment that boosts farm yields.

Doug Zink, who farms 35,000 acres near Carrington, North Dakota, said he likes to trade in his fleet of four combines and planters nearly every year to ensure that his equipment is under warranty, which saves thousands of dollars in maintenance costs and helps avoid breakdowns during key seeding and planting periods.

They also receive deep discounts – as much as $40,000 for some combine harvesters that can cost as much as $400,000 – allowing them to upgrade more often.

Manufacturers are increasingly willing to cut such deals to keep clients as the number of customers falls. Deere & Co <DE.N> said that it will reduce production by 20% at its facilities in Illinois and Iowa in the second of half of the year. Rival agricultural machine makers AGCO Corp <AGCO.N> and CNH Industrial <CNHI.N> have also slashed production to keep inventory in line with retail demand.

Large farms also have the easiest access to capital, with bankers still eager to provide loans to growers with plenty of collateral. “The ag trend is going to larger farms,” Kusler, the bank president in Hazelton, North Dakota, said, “The loans get much larger.”

Appert had no problem getting a loan to finance expansion.

“If you want to get a mortgage and buy a piece of land it is just boom, boom, boom,” he said.

(Reporting by Mark Weinraub; Editing by Caroline Stauffer and Marguerita Choy)

Major grain traders face one-two punch from U.S. floods, trade war

Water stands next to a field of crops near Putnam County, Illinois, U.S. July 5, 2019. Picture taken July 5, 2019. REUTERS/Stephanie Kelly

By Karl Plume

CHICAGO (Reuters) – Severe U.S. weather likely dented earnings for large grain companies including Archer Daniels Midland Co and Bunge Ltd for a second straight quarter, adding to headwinds from a still-unresolved U.S.-China trade war, analysts and economists said.

ADM and Bunge, as well as peers Cargill Inc and Louis Dreyfus Co, known as the ABCD quartet of global grain trading giants, faced processing-plant downtime, rail, and barge shipping delays and other supply uncertainty this spring as historic floods ravaged the central United States.

The weather woes are heaping more pain on the battered U.S. agricultural sector already hard-hit by a years-long crop supply glut and the U.S.-China trade war now entering its second year. The tariffs China imposed on soybean exports from the United States in retaliation for U.S. duties on Chinese goods curbed shipments of the most valuable U.S. export crop.

The excessive rains and flooding could also have a lasting impact on the grain merchants, whose latest round of quarterly earnings will start this week. ADM and Cargill are viewed as particularly vulnerable due to their outsized U.S. footprints. Reduced U.S. corn and soybean plantings will likely cut available crop supplies in the United States, potentially driving up raw material costs and squeezing margins.

“They thrive on volumes and margins and both of those are going to be depressed in the coming year with the bushels being smaller and the margins likely not being there,” said Kevin McNew, chief economist with Farmers Business Network. “Export business is just going to fall off the cliff, especially for corn.”

The U.S. corn crop was more affected by floods than soybeans because soy can be planted later in the season.

FILE PHOTO: A flooded parcel of land along the Platte River is pictured in this aerial photograph at La Platte, south of Omaha, Nebraska, U.S. March 19, 2019. REUTERS/Drone Base/File Photo

FILE PHOTO: A flooded parcel of land along the Platte River is pictured in this aerial photograph at La Platte, south of Omaha, Nebraska, U.S. March 19, 2019. REUTERS/Drone Base/File Photo

WEAKER RESULTS

The first of the companies scheduled to report is privately held Cargill, which announces fiscal fourth-quarter earnings on Thursday.

The results will cover the March-to-May period, when flooding disrupted grain movement, including export shipments, and the year’s second “bomb cyclone” blizzard temporarily shuttered at least six Cargill grain handling facilities and a beef processing plant.

Cargill and ADM both own barge companies that haul grain and other products on the Mississippi River and its tributaries. Grain barge movement so far this year is down about 37% from a year ago, according to U.S. Army Corps of Engineers data, due largely to prolonged river closures triggered by floods.

Cargill is expected to report weaker results compared with the very strong earnings of the year-ago quarter, due partly to expected lower profit in its origination and processing unit, said Bill Densmore, senior director of corporate ratings at Fitch Ratings.

Bunge and ADM will follow, with second-quarter results covering April, May and June scheduled for release on July 31 and Aug. 1, respectively. Privately held Louis Dreyfus is expected to issue interim first-half results in the autumn.

Shares of publicly traded ADM and Bunge are hovering just above three-year lows notched this spring as mounting concerns about U.S. plantings and trade fueled investor nervousness.

FILE PHOTO: Flooded farm fields are seen from an aerial photo taken while Nebraska Army National Guard Soldiers used a CH-47 Chinook helicopter to deliver multiple bales of hay to cattle isolated by historic flooding in Richland, Nebraska, U.S., March 20, 2019. Picture taken on March 20, 2019. Courtesy Lisa Crawford/Nebraska National Guard/Handout via REUTERS

FILE PHOTO: Flooded farm fields are seen from an aerial photo taken while Nebraska Army National Guard Soldiers used a CH-47 Chinook helicopter to deliver multiple bales of hay to cattle isolated by historic flooding in Richland, Nebraska, U.S., March 20, 2019. Picture taken on March 20, 2019. Courtesy Lisa Crawford/Nebraska National Guard/Handout via REUTERS

UNEVEN IMPACTS

With its concentration of assets in the United States and its large U.S. ethanol business, ADM was likely hit harder by adverse U.S. weather than Bunge, analysts said.

ADM cited poor U.S. weather for a nearly $60 million drop in operating profit in its first quarter and warned in April that lingering weather impacts would cut second-quarter earnings by $20 million to $30 million. Some analysts expect ADM to post as large a hit to second-quarter earnings as in the first quarter as adverse weather stretched through the spring season.

“ADM’s first-quarter estimate of $50-60 million seems like a good starting point” for the second-quarter impact, said Seth Goldstein, analyst with Morningstar.

ADM’s soy processing, ethanol and sweeteners and starches units may post lower margins, and smaller corn and soybean crops will hurt its grain origination business, said Heather Jones, founder and senior analyst with Heather Jones Research LLC.

The price of corn, the most common feedstock for U.S. ethanol makers, has surged as U.S. farmers struggled to plant the 2019 crop due to a historically soggy spring. Cash corn premiums in parts of the eastern Midwest, where planting delays were most acute, are at a six-year high. Soybean prices hit a one-year top last week.

“Bunge is less exposed, but higher bean costs would squeeze soy crush margins in the U.S.,” Jones said. Bunge is the world’s largest soybean processor.

(Reporting by Karl Plume in Chicago; Editing by Caroline Stauffer and Matthew Lewis)

Armada of barges cleared for Mississippi River shipments after floods

FILE PHOTO: The Peoria Lock and Dam building is shown surrounded by flood waters of the Mississippi River in Peoria, Illinois, U.S., May 16, 2019. U.S. Army Corps of Engineers/Rock Island District/Handout via REUTERS

By Karl Plume

CHICAGO (Reuters) – The upper Mississippi River reopened to barge traffic on Friday as vessels were cleared to ship through St. Louis harbor, the U.S. Coast Guard (USCG) said, and the situation quickly became a logistics nightmare as dozens of towboats and hundreds of delayed barges tried to maneuver upriver.

After what many grain shippers have called the worst river flooding ever in terms of timing, breadth and duration, the vessels may finally be able to reach elevators in the heart of the U.S. farm belt to haul away export-bound corn and soybeans.

But the economic pain of this year’s floods on farmers, barge operators and grain traders like Archer Daniels Midland Co, Bunge Ltd and Cargill Inc will likely continue.

The Mississippi River, which transports 60 percent of all export-bound U.S. corn and soybeans to terminals near the Gulf Coast, has not been fully navigable since November due to winter closures in the north and widespread flooding this spring.

Shippers have moved some grain to port by rail, shipped it to domestic users by truck or simply left crops in storage and dropped prices offered to farmers.

Shipping delays were the latest hit to a reeling U.S. agricultural sector, already clobbered by slumping farm incomes, delayed spring planting and reduced exports due to the U.S.-China trade war.

Petty Officer Brandon Giles said the Coast Guard lifted its ban on northbound shipping through St. Louis harbor on Friday morning, allowing vessels to transit the busy port for the first time since a brief shipping window opened for a week and then closed a month ago.

Giles had no estimate as to when southbound traffic will resume. Barge shippers said southbound vessels may be cleared as soon as Saturday.

An armada of at least 50 towboats, each pushing multiple barges, was already converging on St. Louis harbor, a barge broker said. The vessels may experience lengthy delays at upriver locks that have also only recently reopened from flood closures.

Shipping restrictions due to strong currents and river-bottom obstructions from flooding were likely to remain in place for the foreseeable future.

More rain is expected over the next week, potentially slowing the river’s anticipated drop or triggering fresh restrictions on navigation.

“It won’t be like in a car race, going from a yellow flag to a green flag. It’s going to take a while to get back up to the throughput that river is normally able to provide,” said Mike Steenhoek, executive director of the Soy Transportation Coalition.

“The worry is that this could be a very brief relaxation of restrictions, just a temporary reprieve,” he said.

BACKLOG OF BUSINESS

River closures delayed fertilizer deliveries earlier this spring as farmers prepared to plant crops. Now, as farmers are cleaning out storage bins to make room for the next harvest, the river woes have slowed the flow of grain to market.

Large agribusinesses that rely on efficient export shipments are likely to report a drag on earnings from flooding this spring in their grain trading, handling and shipping businesses when they report in July and August, analysts said.

ADM, Bunge, Cargill and Louis Dreyfus Co, known as the ABCD quartet of grain giants, all operate large export terminals along the Mississippi River near the Gulf Coast. ADM and Cargill also both own barge companies.

A backlog of grain business that has been on hold for much of the spring could have shippers and exporters playing catch-up through the summer.

“It will take me probably until the end of August to get caught up with all the freight I owe for April, May and June when we were shut down,” one barge broker said.

The flood’s cost to the grain handlers likely totals hundreds of millions of dollars, traders and shippers estimated, due to lost grain sales, missed shipping and export opportunities and increased costs for moving needed grain supplies via other means such as rail.

Weekly grain barge unloads at Gulf Coast elevators fell to just 349 barges last week, the least in any week in six years, according to U.S. Department of Agriculture data.

Although railcar shipments to the Mississippi Gulf have more than doubled, grain volumes have been minimal. It takes 15 rail cars to move what a single barge can.

(Reporting by Karl Plume in Chicago; Editing by Caroline Stauffer and David Gregorio)

Floods stall fertilizer shipments in latest blow to U.S. farmers

FILE PHOTO: The contents of grain silos which burst from flood damage are shown in Fremont County Iowa, U.S., March 29, 2019. REUTERS/Tom Polansek

By Karl Plume

CHICAGO (Reuters) – Farm supplier CHS Inc has dozens of loaded barges trapped on the flood-swollen Mississippi River near St. Louis – about 500 miles from the company’s two Minnesota distribution hubs.

The barges can’t move – or get crucial nutrients to corn farmers for the spring planting season – because river locks on the main U.S. artery for grain and fertilizer have been shuttered for weeks. High water presents a hazard for boats, barges and lock equipment.

Railroads have also been plagued by delays from winter weather and flooding in the western Midwest, further disrupting agricultural supply chains in the nation’s breadbasket.

FILE PHOTO: Flood damage is shown in this aerial photo in southwestern Iowa, U.S., March 29, 2019. REUTERS/Tom Polansek/File Photo

FILE PHOTO: Flood damage is shown in this aerial photo in southwestern Iowa, U.S., March 29, 2019. REUTERS/Tom Polansek/File Photo

The transportation woes are the latest headache for a U.S. agricultural sector reeling from years of slumping profits and the U.S.-China trade war, and they threaten to cut the number of acres of corn and wheat that can be planted this year.

The shipping delays follow months of bad weather in the rural Midwest, including a “bomb cyclone” that flooded at least 1 million acres (405,000 hectares) of farmland last month and a record-breaking April snow storm.

“Our barges are a long way from where we need them in the upper Midwest,” said Gary Halvorson, senior vice president of agronomy at CHS. “We really don’t think that any rail line will be at their preferred service rate until summer.”

Agricultural retailers rely on barges and trains to resupply distribution warehouses across the farm belt. But river flooding has delayed the seasonal reopening of the northern reaches of the Mississippi River to barge traffic. The latest National Weather Service river forecasts suggest one of the river’s southernmost locks could remain closed until at least the first week of May.

FALLING PROFITS, PRODUCTION

Reduced or poorly timed fertilizer applications can hurt yields, potentially denting this year’s U.S. farm profits, which are already predicted to be about half of their 2013 peak, according to the latest U.S. government forecast. Delayed shipments can also mean lost sales for farm suppliers and higher demurrage penalties, or late-return charges, on stalled barges and rail cars.

CHS, one of the largest publicly traded U.S. agriculture suppliers, said this month cited poor weather as a key reason for a $8.9 million drop in agricultural profits during its fiscal second quarter.

Agribusiness giant Archer Daniels Midland Co said severe weather and flooding would cut its first-quarter profit by $50 million to $60 million while DowDuPont said flooding would slash first-quarter profits in its agriculture division by 25 percent.

Fertilizer producers such as Nutrien Ltd, Mosaic Co and Yara International also lost sales due to bad weather in the fourth quarter of last year and first quarter of this year. Mosaic announced last month that it would cut U.S. phosphate fertilizer production by 300,000 tonnes for the spring season due to poor weather and large inventories left over from the fall.

Farm retailers such as CHS and privately held Growmark may see additional losses through the spring season as the tighter planting window limits the application services they provide, according to CoBank analyst Will Secor.

SCRAMBLING TO PROTECT CROP YIELDS

Farmers are not expected to skip nitrogen fertilizer applications entirely, which would cause yields to drop by about half, according to Purdue University agronomist Bob Nielsen. But higher nutrient costs could have growers applying less-than-optimal amounts.

Some farmers could shift from corn to soybeans, which can be planted later and require fewer fertilizer applications. But soybeans will continue to face uncertain demand as long as the U.S. and top buyer China remain locked in a trade war.

“Right now my plan is to plant more corn because the price of beans is so low,” said Don Batie, a farmer near Lexington, Nebraska.

The weather problems started last autumn, a period when some farmers treat fields after harvesting in preparation for the following spring. But wet weather prevented fall fertilizer applications, and an exceptionally snowy winter in many areas slowed or halted winter field work.

More recent storms have threatened to narrow the limited spring window for field treatments.

“When you add to it this re-supply constraint of not being able to move barges up the Mississippi, it puts us in a precarious position,” said Kreg Ruhl, manager for crop nutrients division at Growmark, the country’s third-largest agriculture retailer in terms of revenue.

PRICES RISING

Retail fertilizer prices have started rising in parts of the Midwest and are likely to rise further as local supplies are depleted and retailers scramble to resupply.

In Iowa, the top U.S. corn producing state, the price of the common fertilizer urea was up 20 percent in late April from a year ago, and anhydrous ammonia was up 27 percent. Both hit their highest early spring levels in three years, according to U.S. Department of Agriculture data.

Without timely barge deliveries, CHS will lean on its rail network that brings imported supplies from Galveston, Texas, to any of the 29 rail hubs it owns in places like Sioux Falls, South Dakota; Marshall, Minnesota; and Minot, North Dakota.

Higher U.S. fertilizer prices and strong demand from other countries could help producers such as Nutrien, Mosaic and Yara recover some recent profit weakness in upcoming quarters.

For farmers and fertilizer retailers, however, uncertain fertilizer deliveries will likely weigh on agricultural markets through the planting season.

“We’re doing our very best to make sure that our retail network is supplied,” said CHS’s Halvorson.

(Reporting by Karl Plume in Chicago Editing by Brian Thevenot and Caroline Stauffer)