Heavy rains play havoc with US farmers' planting season

Chicago

THERE has never been a spring planting season like this one. Rivers topped their banks. Levees were breached. Fields filled with water and mud. And it kept raining.

It was raining when US farmers, a year into being squeezed out of the world's largest soybean market by the trade war with China, were supposed to start putting down crops. It was raining when President Donald Trump risked starting a feud with Mexico, the biggest buyer of US corn, by threatening to slap tariffs on its exports.

"You hear words like Biblical, unprecedented," said Sherman Newlin, a corn and soybean farmer in Illinois. "That's all true." The storms and rains may soon lift, but the layers of uncertainty just keep adding up.

Farmers who have lost access to Chinese soy buyers don't see relief on the horizon. Other countries may chip away at corn exports. With Brazil reaping a bumper crop while US farmers watched the weather, buyers in Asia were shopping for South American grain.

Now there are the fears about Mexico, which bought about US$5.5 billion in US grain and soy shipments last year. Tariffs could also upend ratification of the new trade agreement between Mexico, the US, and Canada, said Beth Ford, chief executive officer of Land O'Lakes Inc. "Stress is at a tipping point for many in farm country," she said. "The last thing they need right now is more uncertainty."

The National Grain and Feed Association agreed, saying in a statement that the duties "unquestionably will jeopardise" the accord.

"It is fair to say that there has never been a geopolitical situation in modern times like the one we have right now," Matt Campbell, a risk management consultant at INTL FCStone, said in an email.

There has never been weather like this, either. The 12 months that ended with April were the wettest ever for the contiguous US. That spurred other firsts: corn plantings are further behind schedule for this time of year than they have been in records dating to 1980 and analysts are predicting an unheard-of six million acres intended for the grain may simply go unsown this year.

"Every farmer that I talk to says, 'I've never seen anything like this in my life,' and these are not 20-year-olds," said Tom Sleight, CEO of the US Grains Council, a trade group.

Ripple effects are already hitting businesses reliant on grains, especially corn, the most widely grown US crop. Amid the deluge, prices slumped for cattle heading to feedlots to bulk up on corn, which surged 18 per cent in May, the most in a month since 2015. And the grain rally sent shares tumbling for Tyson Foods Inc and Pilgrim's Pride Corp, whose chickens feed on corn.

Meanwhile, demand for fertiliser and other crop chemicals has been slammed. Hedge funds who had made massive bets that corn prices would decline drastically cut those positions last week, US Commodity Futures Trading Commission data showed on Friday.

Even if the heavy rains do break, as forecast, through June 10, it may be too late for some.

In Keota, Iowa, Lindsay Greiner sowed his 700 acres of corn towards the end of April - and then wasn't able to get into his soaked fields for five weeks. He's expecting much lower yields this year than last. The crop right now is yellow. "It should be green," he said. "It looks so bad."

In Illinois, Mr Newlin, whose farm is about a four-hour drive south of Chicago, said he has been rained out most days since he started planting on May 17. He did manage to sow about 60 per cent of the 1,000 acres where he wanted to put down corn, but standing water and muddy conditions in those fields likely will drag down yields.

His crop insurance coverage will begin to decline after June 5. Generally, insurance claims for crops that can't be planted pay out at less than half of the value of what would have been the harvest. The US$16 billion in farm aid that Mr Trump has promised to help farmers won't be of any help, as it's now framed, to anyone who can't get seeds into the ground.

Mr Newlin called the planting season "a disaster". "Anything in our area that had been planted looks like junk," he said. "The weather just won't give you a break." BLOOMBERG