Spring Floods Have Lasting Impact on Midwestern Transportation Market
For anyone in and around the Corn Belt in 2019, the lasting effects of this spring’s flooding are still front and center in everyone’s mind. The economy has been impacted as two of the area’s largest industries have been hit the hardest – agriculture and transportation.
Farming and freight are indelibly tied in this part of the country as every time a load of beans, corn or wheat ships out, money flows into the farming communities and major cities nearby. Recently, FreightWaves’ Nick Austin wrote about the negative effects of the upcoming winter has had on this year’s potato crops. In Nebraska and Iowa, farmers and transporters are feeling the impacts of late spring flooding and the threatening signs of an early winter coming.
In speaking with drivers, farmers and executives from agricultural, trucking and intermodal companies, a few things are clear:
- The region is still reeling from the floods and concerned for what next spring may look like if the standing water from last spring freezes before being covered by this year’s snow.
- Rail transportation has been impacted by damage done to infrastructure last spring that hasn’t been addressed yet.
- Agricultural shippers and carriers are uncertain about what to expect from a volume and pricing perspective this year and beyond.
“As soon as the floods hit, we saw shippers moving their volume off the rails and on to trucks almost overnight. Those trends have continued through harvest this year and it’s made a difference in our business since spring,” said one intermodal executive based in Omaha, Nebraska and Kansas City, Missouri. Loaded outbound railcar volumes out of Omaha (53-foot containers) are well below their average levels compared to the same time-frame in 2017 and 2018 (see FreightWaves SONAR chart below). Meanwhile, outbound tender volume from Omaha has trended higher than expected late in the third quarter and early in the fourth quarter as a result of lower 2019 trucking rates and less access to rail capacity through intermodal providers. This creates an unusually large disparity between volumes of loads moving between rail and over-the-road providers – see SONAR chart below.
Despite the increase in over-the-road tenders over the past few months, truckers are facing unique challenges in the area. “Interstate 29 is shut down for the third time this year. You can’t go anywhere without seeing standing water where fields used to be and busted grain bins everywhere. Some of these small towns probably won’t come back to life,” said Michael Sherman of PMS Trucking in Belden, Nebraska. “I helped haul dirt for one farmer. After the water dissipated, we hauled 100 to 150 truckloads of sand and river silt the farmer had to remove from his fields. After all that, it was too late to plant for that farmer. He’ll just have to wait until next year,” Sherman added.
While the farmers had a problem getting their crops planted, the manufacturers of seed felt the effects as well. “The field behind my house went unplanted this year; that’s a field that usually would be growing beans or corn but this year, nothing,” said Ammon Magnusson, Senior Lead of North America Trucking Procurement for Corteva, the global agriscience company that was recently spun out of DowDupont. “In some cases, we had partners who had already applied crop protection for one crop type prior to planting their seed. Just after planting, the floods came and washed away all the seed. Since they’d already applied for crop protection, planting another crop type wasn’t an option this year. Those farmers just have to wait it out this year and some will receive insurance money to help them get by,” Magnusson went on to say. Interestingly, Corteva’s gross sales volume in North America has dropped by 2%. However, Corteva saw a better than expected third quarter as a result of the delayed planting this year.
While transportation companies and seed manufacturers have taken hits, farmers are being hurt the worst. A recent report from American Farm Bureau Federation states “Chapter 12 Filings Increase 24% Compared to Year-Ago Levels.” The report focuses on the 12-month period ending September 30 and compares results to the previous 12 months. The Corn Belt, in particular, has been hit the hardest, with 255 farm bankruptcy filings this year. Nebraska had 37 farm bankruptcies and Iowa has experienced 24 thus far. That’s six more than Nebraska saw in 2018 and 10 more than Iowa had last year.
“While filings remain well below the historical highs experienced in the 1980s, the trend is a concern,” the report stated. “The support provided to farmers in 2018 and 2019 is expected to alleviate some of the financial stress. However, not all farmers will benefit from trade assistance, farm bill programs, crop insurance or disaster aid. As a result, it could take some time for the financial relief to manifest in the farm bankruptcy trends. Chapter 12 bankruptcies in the third quarter of 2019 were down only slightly, 2%, from the previous quarter.”
The report cites U.S. Department of Agriculture estimates that 2019 farm income of $88 billion – that’s 29% below the record high set in 2013. And a lot of that money is coming to farmers through relief programs for trade or disaster assistance, the farm bill, and insurance payouts.
In a nutshell, these burdens placed on our midwestern industries are going to find their way to every American’s wallet. When there are fewer potatoes, corn and soybeans to go around, prices go up. When the complications of an ongoing trade war are layered in, 2020 is sure to be an interesting year for agriculture and transportation alike.
Source: Charles Dehoney, Freight Waves