Too much of a good thing

by Paul Holmes (paulh@talkbusiness.net) 255 views 

As if we needed confirmation, headlines around the U.S. accompanying a recent national weather story provided it. Yes, indeed, if we hadn’t figured it out already, we were told “The Drought is Over” in virtually all of the United States.

In a May report by the U.S. Drought Monitor, only 2.53% of the total U.S. was experiencing drought, which was a new record low. OK, but just what exactly is the U.S. Drought Monitor?

The U.S. Drought Monitor is a map released every Thursday, showing parts of the U.S. that are in drought. It has been a team effort since its inception in 1999, produced jointly by the National Drought Mitigation Center at the University of Nebraska-Lincoln, the National Oceanic and Atmospheric Administration and the U.S. Department of Agriculture.

The USDA uses the monitor to trigger disaster declarations and eligibility for low-interest loans. The IRS uses it for tax deferrals on forced livestock sales due to drought, while the Farm Service Agency uses it to determine eligibility for its livestock forage program.

For those of us in farm and ranch country, the U.S. Drought Monitor is more than just data from the Feds that gives headline writers a chance to master the obvious. “The Drought is Over” appeared numerous times in print and online, but it appears we were largely spared “Water, Water Everywhere.” In fairness, anybody on a newspaper’s copy desk glancing tensely at the clock while staring at a deadline might be tempted to use one of those.

Having established that we’re not suffering from a lack of precipitation, what then, in the words of the late, great broadcaster Paul Harvey, is the rest of the story?

The rest of the story is we have too much of a good thing. Over the 12-month period from May 2018 to April of this year, the rainfall over the Lower 48 averaged 36.2 inches, the first time it has exceeded 36 inches, more than 6 inches above average, for a 12-month period in the more than 120 years of precipitation record-keeping.

All along the Mississippi River, overabundant precipitation has made is presence seen as well as felt. In mid-May, the upper Mississippi River fully reopened to boat and barge traffic for the first time since November as shippers worked frantically to move a backlog of overdue fertilizer barges to farmers hoping to plant corn before the end of the month.

Some fertilizer barges had been parked on river banks near St. Louis and further downriver for more than two months because the worst Midwest flooding since 1993 shut down locks and triggered shipping restrictions on the flood-swollen waterway.

Last month, the Corps of Engineers opened the Bonne Carret Spillway about 30 miles upriver from New Orleans for just the 13th time in its history and for the first time in consecutive years. At Vicksburg and Baton Rouge, officials reported the longest-lasting periods above flood stage since the so-called Great Flood of 1927. It seems likely in the lower Mississippi Valley that several hundred thousand acres of cropland will go unplanted this season.

In the Midwest, only about half of the corn acreage has been planted so far. Normally, nearly 80% is in the ground by late May.

Soybean prices remained in the $8 per bushel range in late May as traders begin to factor in more U.S. soybean acres this year from farmers switching corn acres over to beans. Soybean prices have been perhaps one of the most visible casualties of the trade war between the United States and China. Some analysts say that the tariffs are likely to continue into the summer, despite the fact that the sides are expected to talk again.

Secretary of Agriculture Sonny Perdue said that USDA could offset losses incurred by farmers in the ongoing trade war in the amount of $15 billion to $20 billion. “We’re expediting at the President’s direction so farmers, as well as China, can know they cannot use the political impact of damaging our farmers to our great exporters in this trade disruption,” he said.

While the trade war persists, our neighbor to the south, Brazil, has been able to capitalize. An estimated 5.5 million tons of soybeans were traded in late May. More are scheduled to leave Brazilian ports in June, July and August, according to estimates by the Center for Advanced Studies in Applied Economics.

The fact is, China needs soybeans and if they don’t get the product from the United States, it will have to come from somewhere else. Right now, that somewhere else appears to be Brazil with the failure of Washington and Beijing to resolve our ongoing trade dispute.

Chinese demand also comes at a time when the U.S. dollar hit the highest against Brazilian currency in more than seven months, boosting the value of Brazilian soybean exports from the Chinese buyers’ point of view, shifting demand to Brazil.

Already, the U.S. soybean carryout — the ending stock of a commodity after all demand has been satisfied — is estimated by USDA at 995 million bushels. It appears it could be larger than that if a significant number of farmers make the shift from corn to beans this year because of flooding delays.
Again, too much of a good thing.

While Washington can’t control the weather, it certainly can influence who buys American products. It’s in our farmers’ interests to get something done.

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Editor’s note: Paul Holmes is editor-at-large for Northeast Arkansas Talk Business & Politics. He can be reached at paulh@talkbusiness.net. The opinions expressed are those of the author.

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