As if agriculture didn’t have enough Black Swans to manage, tropical storm Ida may have caused critical damage to U.S. ag export pipelines just as combines begin to fire up for fall harvest.

Looking back, the similarities to Katrina, which struck nearly the same day 16 years ago, seem uncanny. IDA hit hardest the port area that provides 59% of the U.S. gulf Ag export capacity. And it struck right as 2021 harvest is getting started – a critical time when agriculture needs its pipeline logistics in place to move inventory and new crop as it becomes available.

As a result of this storm and delayed export capacity, cash markets collapsed along the river, spreads widened, and traders black swanned to bearish stances.

It could be worse

According to the Coast Guard and shipping sources as of this writing, a roughly 75-mile (120-km) stretch on the Mississippi remained closed to all vessel traffic due to downed power lines and sunken vessels in the river. Mike Strain, commissioner of the Louisiana Department of Agriculture and Forestry, saw barges and at least five ships grounded during a flyover of the river.

The damage from the storm was bad, but it could have been worse. It appears that as crews get to facilities it will mainly be a power and debris issue. That is estimated to take two to four weeks. In the meantime, vessels are being diverted to other loading facilities and where possible, some loadouts have been switched to the PNW.

All this to say that export capacity will be reduced but we are not talking about hundreds of millions of bushels. Those bushes are likely to be shipped as soon as facilities are back up and thus total year-to-date shipments will likely end up as expected in the long run.

Impact on grain markets

With an immediate shut down of gulf demand and crippled logistics to move grain down river, basis along the river either went to sharply lower or no offer. This put pressure on interior markets as well, and merchandisers are now scrambling to figure out how they will move product during harvest.

Barge freight falls and then rises as river terminals use barges as storage and to keep some sense of volume turn over. Futures don’t like uncertainty, so down they go. Add to that recent rains and prospects for improving yields on the tail end of the growing season. Prices take out chart support and funds continue to liquidate long positions.

Look for opportunity

History tells us that when markets are impacted by rogue events, it creates an opportunity. When Chernobyl occurred, grain markets exploded as supplies would be contaminated and in short supply. The rally lasted days and was a selling opportunity. When 9/11 hit, the markets collapsed as the world’s economy imploded; the break was short lived and was a buying opportunity. There are other examples, but the point is, in the big picture, hurricane Ida does not change the world supply demand picture. The logistics issues Ida created on a macro scale are small; therefore, taking the opposite side of fear is usually a good bet.

Stay focused

We advise that you remain focused on profitability. Use the AgMarket.Net App and reassess your yield and input costs, run the numbers with all your current sales, and see where your breakeven is. Look at the optimizer and see if there is a strategy you should employ that will better balance your risk and income positions.

You are about to embark on a busy several weeks. The distraction of the market is not something you need right now. Most accidents are a result of a distraction. Taking your mind off the job to stress about markets is simply not necessary.

For most of you, your operation is headed for a great financial year and again for most of you, the profitability of the market is still very strong. So even though Ida was the perfect storm, it’s impact will not last forever and the sun does lighten our days following darkness. Watch your profitability and stay safe this harvest season.

Contact Bill Biedermann at 815-404-1917 or [email protected]

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