Headlines:
- Hurricane Michael Threatens Southeast’s Crops and Livestock
As Hurricane Michael made landfall Wednesday, farmers in the Southeast were still recovering from the devastation caused by Hurricane Florence just weeks ago. Michael, which brought 155 mph winds and could dump several inches of rain on the region, was threatening crops and livestock from the Florida panhandle to North Carolina. Pecan, cotton, and peanut harvests were at risk, as the dangerous storm plowed its way through Florida, Georgia, Alabama, and the Carolinas. In 2016, Hurricane Matthew caused the loss of 10% of the Southeast’s pecan trees, which blew over in the wind. With Michael’s excessive rain and winds, unharvested peanuts could rot in the ground and cotton bolls could be stripped from the plants. “The track of the hurricane is almost like you could call it the Southeast Cotton Industry Hurricane, because it’s coming in to Panama City, and there’s about 140,000 acres of cotton in the Florida panhandle,” David Ruppenicker, CEO of Southern Cotton Growers, told CNBC. Although farmers in the region were reportedly working around the clock to harvest as much as possible before the storm arrived, much of the season’s crop remained in the ground. As of October 7, only 58% of Florida’s peanut crop had been harvested and just 28% of Alabama’s. In Georgia, just 15% of cotton and 33% of fall vegetables had been harvested when the storm hit.
- ‘It Has Been A Horrible Harvest, So Far,’ Analyst Says
Prices are relatively stagnant, with the markets not going much higher, but not going lower, either, as we plow through a harvest of record yielding corn and soybean crops. It’s usually not the case that record crops don’t push prices to new lows at harvest, but this year was unusual in that prices were pushed down so far in June and early July. Perhaps there isn’t much more downside left? Crops have grown by leaps and bounds since early July, with almost perfect growing conditions around the Corn Belt. Yields expanded significantly since July, and although corn and soybeans have pushed to new lows this fall, they couldn’t stay there, so we are actually trading above our July lows in both commodities. In the case of wheat, we are much higher than those lows. So what pushed us so low in July? China! Or more specifically, the China trade disputes. China has shunned U.S. soybeans after placing a 25% tariff on them, but it is surprising how much demand the U.S. has for soybeans since we dropped $2 in prices (and now we have a firesale on our soybean production). Many countries can’t believe their good fortune, getting a 20% discount from the U.S. (and avoiding paying $2 higher from Brazil or Argentina). So a lot of the world is buying U.S. soybeans. After all, a soybean is a soybean (not like many other products being tariffed between the U.S. and China). The Wall Street Journal yesterday published an interesting article on tariff avoidance, with China basically reclassifying many goods to a non-tariff category and selling them in the U.S. For example, steel plates become “turbine parts” and avoid the tariff. Very clever! But how do you reclassify soybeans going to China to avoid their tariff?
Summary:
Short covering, delayed harvest activity and USDA’s yield reduction get the rally going in Corn today. Prices drew additional support from concerns of crop damage from recent wet and cool weather conditions. Harvest activity looks to resume over the weekend or early next week if dry weather conditions over the next week are realized. Soybean prices were stronger on short covering as well along with carryover strength from the soybean oil market. Prices leveraged additional support from worries about damages to the unharvested bushels from rain delaying harvest activity. The November contract held above its key 50-Period Moving Average. Wheat prices drew support from emerging bargain hunters and some short covering by managed money. Also, anticipation of the US getting some export business helped build support.
