Announcements

Flood Concerns Ease, at Least For Now

Apr 11, 2019
Flood Concerns Ease, at Least For Now

The effects of the recent Midwest flooding are severe and are yet to be fully known. In fact, the disaster is of a scale that is seldom seen in the modern U.S. The lack of fresh news has put a bit of pressure on grains recently but that could change quickly if even more damage is seen.

Spring wheat recently traded at the lowest level in nine months as concerns over flooding eased. According to Agriculture.com, recent weather forecasts were behind the change in sentiment causing prices to decline.

Concerns over planting delays in the Midwest have kept a floor under corn prices in recent weeks. That market support has been counterbalanced, however, by significant supplies keeping any upside rallies limited.

Soybeans recently rallied from a three-month low but have in recent days come under pressure as some take profits.

Even if prices move sharply higher from current levels, the damage for many farmers has already been done. According to Freightwaves.com, millions of bushels of grain in storage were destroyed in last month’s historic floods and under current U.S. law and disaster aid programs there is no method for farmers to be compensated for those stocks.

Livestock

The flooding has also had a significant impact on livestock markets. According to the High Plains Journal, the amount of lost cattle is expected to be “significant.” Recent estimates have put the economic damage at some $400 million. Making matters even worse, farmers and ranchers are having trouble quantifying the total damage due to ongoing high-water. The final toll on livestock may not be known for several months and could still have a strong impact on prices.

A recent article from Drovers.com  quoted its editor, Greg Henderson, as stating: If you use the $400 million and just equivalent that out to fed cattle, that would be 228,000 fed cattle lost.

Cattle prices have seen some significant volatility in recent action and prices have come under pressure. March tends to see soft demand for beef which can lead to lower prices in the finished cattle market. Demand has a further tendency to pick up in April as warmer weather and the grilling season approaches. If demand does not start to increase in the coming weeks, prices could potentially see further declines.

Some Good News for Producers

Nebraska producers who lost livestock during the period of cold and higher-than-normal rain during the months of January, February and March may now be eligible for assistance from the Livestock Indemnity Program. The payment rate is reportedly based on 75% of the average fair market value of the livestock.

Stay Up To Date

At Straits Financial, we aim to keep our brokers and customers informed of current trade data and potential opportunities that may present themselves in the futures and options markets through technical analysis, market commentary, and options information. Sign up to get the latest market commentary and strategy reports daily to your inbox!

DISCLAIMER: This document is issued for information purposes only. This document is not intended, and should not under any circumstances to be construed as an offer or solicitation to buy or sell, nor financial advice or recommendation in relation to any capital market product. All the information contained herein is based on publicly available information and has been obtained from sources that Straits Financial believes to be reliable and correct at the time of publishing this document. Straits Financial will not be liable for any loss or damage of any kind (whether direct, indirect or consequential losses or other economic loss of any kind) suffered due to any omission, error, inaccuracy, incompleteness, or otherwise, any reliance on such information. Trading commodity futures and options products presents a high degree of risk, and losses in excess of your initial investment may occur. Past performance or historical record of futures contracts, derivatives contracts, and commodities is not indicative of the future performance. The information in this document is subject to change without notice.  The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices.