Impact of U.S. drought still being experienced in Corn Belt

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There are reports that the devastating drought in the U.S. Midwest is having an impact on the traditional flow of corn trade in the country.

According to Reuters, dozens of trains and barges are shipping North Dakota or Mississippi corn into the Corn Belt rather than outwards to the U.S. coasts.

Illinois is the nation’s second largest corn and ethanol producer. But the drought has triggered the lowest corn yield in nearly 25 years, which has caused the state to “import” millions of bushels of grain (an unprecedented volume) from North Dakota. That state reportedly produced record crop this year.

Reuters reports that some southern states, which were also spared the worst of this year’s record-breaking drought, are shipping barges of corn up the Mississippi River to the interior.

Traders say that is a reversal of the normal trade flow.

While atypical shipments are not unheard of in the agricultural market, traders tell the news agency that the scale of this year’s upheaval is unprecedented. Reuters reports that it is being fueled both by the dramatic difference between drought-hit Midwest crops and bumper harvests in fringe states.

This unusual grain flow could foreshadow some unfavourable conditions yet to come. There are reports that there could be a scramble for quality corn supplies in the months ahead as end-users work through the smallest U.S. harvest in six years. By next September, Reuters reports that corn stocks are projected to drop to just 5.5 percent of annual demand – that is the bare minimum for operational requirements.

But these market upheavals could actually benefit logistics firms and big merchants such as Cargill. Reuters says that Cargill recorded a four-fold rise in earnings this month and said “atypical trade flows” would spur more demand for its trading expertise.

Meanwhile, railway companies are also benefiting from trade pattern reversals. The news agency reports that railway firms are reaping windfall profits from upheavals in the oil market, and are also moving quickly to take advantage of the scramble in grain trading.

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