DWDP Dowdupont Inc.

By Jesse Newman and Jacob Bunge 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 24, 2019).

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 spent an estimated $244 an acre last year on seed, fertilizer and chemicals for corn, compared with $108 an acre for soybeans, according to the U.S. Department of Agriculture.

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.

The Trump administration said Thursday that it would spend $16 billion to support farmers hit by tariffs on U.S. agricultural commodities, with the majority of funds distributed in direct payments to farmers. Many payments will be calculated based on the counties where they farm, rather than the individual crops they grow, a plan that will avoid distorting farmers' planting decisions, the USDA said.

Nationwide, farmers have planted 49% of their intended corn acres, far below the 80% average for this time of year, according to the USDA. 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, say agricultural economists at the University of Illinois.

The prospect of weather-diminished crops helped lift corn futures prices 3% in the past week. Soybean futures prices fell 2.3% 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," he 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 its planned seed deliveries made it to buyers in the last five days of the first quarter. The company expects 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 gets 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.

After barge traffic resumed on the Mississippi this week, the U.S. Coast Guard on Thursday again closed part of the river near St. Louis because of high water and fast currents. A large backlog of barges had been waiting to be towed upriver, but restrictions will remain in place until conditions improve. More severe weather and flooding are expected across 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 24, 2019 02:47 ET (06:47 GMT)

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