Tropical Storm Florence’s Effect on the Commodities Markets
$CORN, $WEAT, $SOY
- The impact of Florence chases Hogs to higher marks
- Soybean steady post-WASDE.
- Corn falls to the bottom of its trading range.
- Wheat declines sharply.
- Cotton remains firm on Florence.
- Meats move higher, though it is off-season for demand.
As Florence bore down on the Carolinas, millions were at risk from wind, storm surge and flooding, causing many to seek higher ground.
Meanwhile, North Carolina hog farmers faced a unique challenge, that of keeping nearly 9-M hogs safe. North Carolina is the United States’ 2nd-largest hog producer, making about 15% of US pork. Some farmers moved their animals to higher ground, while others prepared for power outages and shortages of grain to feed the hogs.
Another concern is that heavy rainfall could cause waste-filled lagoons on hog farms to overflow, creating an environmental hazard.
Aside from immediate risk to the animals during the storm, damage to infrastructure could keep slaughterhouses closed, creating a short-term backlog of hogs coupled with a pork shortage in America’s supermarkets.
Last Monday, December hog futures contracts blew to a 2-month high as storm fears surged, only to retrace slightly during the week as the storm weakened slightly. Markets traded for 57c per lb Friday and
Other markets that could be affected by Florence include cotton and especially tobacco, as North Carolina is the largest tobacco-growing state.
Last Wednesday, the US Department of Agriculture (USDA) announced its updated estimate of this year’s Corn and Soybean crops, projecting larger harvests of both commodities.
The USDA is now projecting record-high Corn and Soybean yields of 181.3 and 52.8 BPA, respectively. If those figures hold, US farmers will be harvesting the 2nd-largest Corn crop and the largest Soybean crop in history, nearly 10% higher than last year’s harvest.
This news sent both markets to new low marks, with December Corn futures breaking under 3.50 bu, and November Soybeans nearing 8.20 in the aftermath of the report.
Farmers are still holding onto hope that the trade dispute with China will be resolved, bringing the world’s biggest Soybean buyer back US markets. Even if trade doesn’t come back this year, the farmers are still expecting to get a big bailout check from the US government for their Soybeans in the form of trade support, but payments for Corn will be negligible, leaving many producers trapped with a crop that could lose them money if they did not lock in higher prices earlier this year.