Extreme weather in Midwest could impact your grocery bill
Soybean farmer Robb Ewoldt discusses how his farm is being affected by the massive floods.
The extreme weather and record flooding that has been hammering the Plains and Midwest will likely impact everyone’s wallet.
Eight states along the Mississippi have been hit by the longest stretch of flooding since the Great Flood of 1927. Across the grain belt, farm fields are flooded. This is already having a big impact on grain prices as farmers can’t get into the field to plant, leading to the slowest pace of grain planting in recorded history.
According to the USDA, only 58 percent of the corn crop was planted as of May 26, compared to 90 percent at this time last year. Soybean planting is also well behind, as only 29 percent of the soybean crop was planted, below the average of 66 percent. Now it looks like over 6 million acres will go unplanted.
Because of this slow pace, grain market sentiment has shifted from fears of an oversupply due to the U.S.-China trade war, to now thoughts of shortages in just a few weeks. If the U.S. does not get its crop planted, there is a real risk of a global shortfall of grain.
Feed costs could rise dramatically, and eventually that will mean higher food costs on everything from meats, breads, pastas and poultry. But it is not just food prices that will rise. Floods are already impacting gasoline prices.
Just when you thought it was safe to go back to the gas pump, the floods are pushing gasoline prices higher. As a direct result of the floods, we are seeing prices in ethanol, a major gasoline additive, spike by over 10 percent in just a few weeks.
That has happened not only because the cost of corn is rising, but also because ethanol plants have slowed production and the flooding has shut down multiple pipelines and some ethanol producing plants.
Oil supply to refineries has been constrained as flooding has shut down major pipelines, even impacting the country’s biggest oil storage hub in Cushing, Oklahoma. The Ozark pipeline that is an artery out of Cushing was shut down this week due to the floods. This all translates to higher prices.
Yet, at the same time the floods are having a dampening effect on demand. Diesel demand is a far cry from what it could have been because farmers cannot get into the field to plant. If the rain doesn’t stop soon, those acres may never get planted and that expected bump in diesel demand may be gone forever.
CLICK HERE TO GET THE FOX BUSINESS APP
Gasoline demand may fall short of expectations as well. Memorial Day travelers may have stayed home as bad weather and flooding ruined many plans. So, while we are definitely seeing upward price pressures because of the damage to the supply side, the price spike may be delayed because of the hit to the demand side.
Phil Flynn is senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com.