Floods stall fertilizer shipments in
latest blow to U.S. farmers
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[April 25, 2019]
By Karl Plume
CHICAGO (Reuters) - Farm supplier CHS Inc
has dozens of loaded barges trapped on the flood-swollen Mississippi
River near St. Louis - about 500 miles from the company's two Minnesota
The barges can't move - or get crucial nutrients to corn farmers for the
spring planting season - because river locks on the main U.S. artery for
grain and fertilizer have been shuttered for weeks. High water presents
a hazard for boats, barges and lock equipment.
Railroads have also been plagued by delays from winter weather and
flooding in the western Midwest, further disrupting agricultural supply
chains in the nation's bread basket.
The transportation woes are the latest headache for a U.S. agricultural
sector reeling from years of slumping profits and the U.S.-China trade
war, and they threaten to cut the number of acres of corn and wheat that
can be planted this year.
The shipping delays follow months of bad weather in the rural Midwest,
including a "bomb cyclone" that flooded at least 1 million acres
(405,000 hectares) of farmland last month and a record-breaking April
"Our barges are a long way from where we need them in the upper
Midwest," said Gary Halvorson, senior vice president of agronomy at CHS.
"We really don't think that any rail line will be at their preferred
service rate until summer."
Agricultural retailers rely on barges and trains to resupply
distribution warehouses across the farm belt. But river flooding has
delayed the seasonal reopening of the northern reaches of the
Mississippi River to barge traffic. The latest National Weather Service
river forecasts suggest one of the river's southernmost locks could
remain closed until at least the first week of May.
FALLING PROFITS, PRODUCTION
Reduced or poorly timed fertilizer applications can hurt yields,
potentially denting this year's U.S. farm profits, which are already
predicted to be about half of their 2013 peak, according to the latest
U.S. government forecast. Delayed shipments can also mean lost sales for
farm suppliers and higher demurrage penalties, or late-return charges,
on stalled barges and rail cars.
CHS, one of the largest publicly traded U.S. agriculture suppliers, said
this month cited poor weather as a key reason for a $8.9 million drop in
agricultural profits during its fiscal second quarter.
Agribusiness giant Archer Daniels Midland Co said severe weather and
flooding would cut its first-quarter profit by $50 million to $60
million while DowDuPont said flooding would slash first-quarter profits
in its agriculture division by 25 percent.
Fertilizer producers such as Nutrien Ltd, Mosaic Co and Yara
International also lost sales due to bad weather in the fourth quarter
of last year and first quarter of this year. Mosaic announced last month
that it would cut U.S. phosphate fertilizer production by 300,000 tonnes
for the spring season due to poor weather and large inventories left
over from the fall.
Farm retailers such as CHS and privately held Growmark may see
additional losses through the spring season as the tighter planting
window limits the application services they provide, according to CoBank
analyst Will Secor.
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The contents of grain silos which burst from flood damage are shown
in Fremont County Iowa, U.S., March 29, 2019. REUTERS/Tom Polansek
SCRAMBLING TO PROTECT CROP YIELDS
Farmers are not expected to skip nitrogen fertilizer applications
entirely, which would cause yields to drop by about half, according
to Purdue University agronomist Bob Nielsen. But higher nutrient
costs could have growers applying less-than-optimal amounts.
Some farmers could shift from corn to soybeans, which can be planted
later and require fewer fertilizer applications. But soybeans will
continue to face uncertain demand as long as the U.S. and top buyer
China remain locked in a trade war.
"Right now my plan is to plant more corn because the price of beans
is so low," said Don Batie, a farmer near Lexington, Nebraska.
The weather problems started last autumn, a period when some farmers
treat fields after harvesting in preparation for the following
spring. But wet weather prevented fall fertilizer applications, and
an exceptionally snowy winter in many areas slowed or halted winter
More recent storms have threatened to narrow the limited spring
window for field treatments.
"When you add to it this re-supply constraint of not being able to
move barges up the Mississippi, it puts us in a precarious
position," said Kreg Ruhl, manager for crop nutrients division at
Growmark, the country's third-largest agriculture retailer in terms
Retail fertilizer prices have started rising in parts of the Midwest
and are likely to rise further as local supplies are depleted and
retailers scramble to resupply.
In Iowa, the top U.S. corn producing state, the price of the common
fertilizer urea was up 20 percent in late April from a year ago, and
anhydrous ammonia was up 27 percent. Both hit their highest early
spring levels in three years, according to U.S. Department of
Without timely barge deliveries, CHS will lean on its rail network
that brings imported supplies from Galveston, Texas, to any of the
29 rail hubs it owns in places like Sioux Falls, South Dakota;
Marshall, Minnesota; and Minot, North Dakota.
Higher U.S. fertilizer prices and strong demand from other countries
could help producers such as Nutrien, Mosaic and Yara recover some
recent profit weakness in upcoming quarters.
For farmers and fertilizer retailers, however, uncertain fertilizer
deliveries will likely weigh on agricultural markets through the
"We're doing our very best to make sure that our retail network is
supplied," said CHS's Halvorson.
(Reporting by Karl Plume in Chicago Editing by Brian Thevenot and
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