By Jesse Newman and Jacob Bunge
The wettest year on record is raising costs for the nation's
biggest agricultural companies, stalling farmers' fieldwork and
slowing shipments across the U.S. Farm Belt.
"It's got to be the worst ever that we've seen," said Jim
Collins, head of Corteva Agriscience, the agricultural division of
seed and pesticide maker DowDuPont Inc. Corteva's sales fell 11%
for the most recent quarter it reported this month, partly because
of Midwestern floods.
The past 12 months were the wettest May-to-April period in the
contiguous U.S. since record-keeping began in 1895, according to
the National Oceanic and Atmospheric Administration. Since March,
heavy snow and rain have brought record flooding to parts of the
Midwest, and rivers have overflowed their banks from Illinois to
Nebraska.
While farmers run their tractors full-speed between rainstorms,
time is growing short for agricultural companies to sell some of
their most profitable products, such as full-season corn seed.
Delays planting corn, which typically is sown in late April and
early May, are leading some farmers to switch fields to soybeans or
shorter-season corn varieties, which tend to be less lucrative for
seed and farm-chemical companies such as DowDuPont and Bayer
AG.
Farmers last year spent an estimated $244 an acre on seed,
fertilizer and chemicals for corn, compared with $108 an acre for
soybeans, according to U.S. Department of Agriculture data.
If the spring planting season grows too short, millions of acres
could go unplanted, reducing farmers' need for seed, pesticides and
fertilizer, according to agricultural analysts and academics.
The dismal weather is another blow to farmers and agricultural
companies during a prolonged slump in the U.S. farm economy. Six
straight years of bumper crops have swelled grain supplies and
pushed down prices for farmers, while protracted trade disputes
have slowed crop exports, further pressuring farm income and
agribusiness profits.
Nationwide, farmers have planted 49% of their intended corn
acres, far below the 80% average for this time of year, according
to the U.S. Department of Agriculture. Just 19% of soybean acres
have been planted, compared with the 47% average. This year's corn
planting is the slowest since record-keeping began in 1980,
according to agricultural economists at the University of
Illinois.
The prospect of weather-diminished crops lifted corn futures
prices 6.8% in the past week, while wheat futures climbed 5.2%.
Soybean futures prices fell 0.7% on the potential for farmers to
shift more acres to the oilseed.
Illinois farmer Tom Mueller said he typically tries to get his
400 acres of corn and soybeans planted by the Kentucky Derby in
early May. This year, nothing was planted by that date. Some fields
still had pools of standing water and others were too muddy to
work.
"It seems like all the stress just keeps piling up," Mr. Mueller
said, adding that earlier ice damage to his fields could leave him
without enough hay to feed his beef cattle.
Corteva said less than 50% of the company's planned seed
deliveries made it to buyers in the last five days of the first
quarter. Corteva executives expect farmers would shift some acres
to less-profitable crops, such as soybeans and faster-maturing
corn. But high-capacity seeding equipment means farmers still have
the chance to catch up before the season grows too late, Mr.
Collins said, while corn prices remain attractive relative to
soybeans.
Cold, wet weather has delayed farmers' nitrogen fertilizer
applications, denting first-quarter sales volumes for fertilizer
makers CF Industries Holdings Inc. and Nutrien Ltd.
High water, meanwhile, halted barge traffic on the Mississippi
River, stranding in St. Louis some 80 northbound barges of
fertilizer supplier Mosaic Co. That prompted Mosaic to ship
products from Florida to Midwestern customers via rail, which is
costlier, according to Corrine Ricard, Mosaic's supply-chain
chief.
Some fertilizer-laden barges won't reach Minnesota's Twin Cities
of Minneapolis and St. Paul until late June, well after many crops
are typically planted, said Ms. Ricard. "By then, the party is
largely over, " she said.
Although barges can now move again on the Mississippi, a large
backlog is waiting to be towed upriver, and coming rains could shut
the river again. More heavy rain and severe thunderstorms are
expected for parts of the central U.S. this week, according to
NOAA.
Nutrien, a Saskatchewan-based fertilizer and pesticide supplier,
could benefit as some farmers scrounge for fertilizer. The company
mainly moves its products on railroads, and its 850 U.S. farm
retail locations generally are sitting on very high inventories,
said Chuck Magro, Nutrien's chief executive.
Poor weather is also slowing sales and processing for last
year's crop. As of May 11, the volume of grain that has passed
through portions of the Mississippi, Ohio and Arkansas Rivers this
year was down 32% from the previous three-year average and 24%
compared with last year, according to the USDA.
Grain trader Bunge Ltd., which ferries crops down the
Mississippi to export terminals at the Gulf of Mexico, said this
month that adverse weather cut first-quarter profit by $20 million.
Rival grain company Archer Daniels Midland Co. in April reported a
$60 million hit to quarterly profit because of poor weather. ADM
temporarily idled a Nebraska corn plant that month after
floodwaters overwhelmed a nearby rail line.
Deere & Co., the world's largest manufacturer of tractors
and harvesting combines, said last week that the delayed spring
planting season is adding to farmers' caution on making major
purchases. The equipment maker reduced its 2019 profit and sales
forecasts to reflect sagging demand for its tractors and
planters.
Barred from his fields by rain, Illinois farmer Paul Rasmussen
has been filling his time with other tasks: running errands for his
mother, attending his granddaughter's band concerts, repairing a
lawn mower.
"Planting would be the preferred activity," he said. "There are
lots of unknowns that make a person nervous at this point."
Write to Jesse Newman at jesse.newman@wsj.com and Jacob Bunge at
jacob.bunge@wsj.com
(END) Dow Jones Newswires
May 23, 2019 05:44 ET (09:44 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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