The floods in the American Midwest are not only affecting residents and farmers, but the grain market is also reacting to the extreme weather. An enormous amount of maize and soy has been lost to the water, and livestock farmers have also been badly affected.
According to official figures from the state of Nebraska, $440 million worth of products have now been lost, with beef cattle and pig farmers facing losses of at least $400 million. The government immediately announced that these figures will continue to increase, the news agency writes Reuters. In total, the state's agricultural sector suffered more than $1 billion in damage.
Grain storage affected
The Midwest has been hit hard by flooding. This includes Nebraska, Minnesota, Iowa, Missouri, South Dakota, Kansas, Wisconsin and Illinois. Each of these states accounts for a huge portion of American arable and livestock farming. These states together still have approximately 1,5 million tons of corn, soy and wheat in storage, according to figures from the United States Department of Agriculture (USDA). That figure accounts for 38% of the total inventory in the US.
As a result of the flooding, CBoT in Chicago surged last week; the prices of corn, wheat and soy all ended higher this week. It is precisely because of the low price level that arable farmers have sold less this season, hoping for rising prices. A bountiful harvest left grain silos overcrowded and emergency storage was required. Many of these storage facilities are now flooded.
Infrastructure wiped out
Not only grain silos and bins containing soy and corn have been swept away. The roads, which are now slowly becoming visible again, have also been washed away. The products cannot therefore be removed from the company or sent to companies. Since the floods came very quickly, most companies have not had time to get their animals and products to safety. The flooding also knocked out approximately 13% of U.S. ethanol production. The factories are flooded and cannot be reached by road or rail.
Typically, companies would now be preparing for spring work, but the machines are damaged or inaccessible in the mud. Several plots are not accessible. A number of entrepreneurs in the hard-hit states therefore doubt whether they will be able to sow a crop at all this year. In 2011, the Midwest was also hit hard by flooding. Since then, entrepreneurs have barely been able to replenish their financial reserves, leading to fears of a wave of bankruptcies.
Insurance
Some entrepreneurs can fall back on insurance; those who cannot sow there are entitled to a small compensation. In contrast, there is no such insurance for crops in storage. Sometimes this is covered by company insurance for buildings and machinery, but not always. If the insurance pays out, then it is not yet a big deal. Livestock farmers who lost their herds can fall back on a government insurance program.
There is little room for the farmers to breathe. The national weather service warns of new floods. The warmer weather is melting a lot of snow and ice in the northern states, which is being carried south. The rivers often become blocked by ice floes. These natural dams collect meltwater, which is then released. Floods can therefore cause problems well into April.
Market remains wait-and-see
It is striking that the American futures market is not yet really catching on; the price of corn is the only one in green on Monday, March 25. In addition, the disappointing export figures for the three major commodities ensure that the market remains relatively calm. It is only now becoming clear how extensive the damage is. The sowing season in the affected areas is expected to be significantly delayed.