Ep. 40 Preliminary Analysis Suggests Historic Flooding Results in $79 Million in Crop-Related Damages

00;00;08;27 – 00;00;10;14
Dr. Hunter Biram
Let’s do it.

00;00;10;17 – 00;00;31;05
Riley Smith
Good morning. Good morning. Welcome to another episode of Morning Coffee and Ag Markets with your host, Riley Smith. And today I have Dr Hunter Biram in here in the studio with me. And we’re going to be talking about the preliminary analysis suggest historic flooding results in $79 million in crop related damages.

00;00;31;13 – 00;00;54;23
Riley Smith
So we’re going to be talking about the crop related damages that happened over, I believe April 2nd to April 5th, the major flooding I know in our area, we got roughly about 14in of rain, and it got up extremely, high for our part of the world. So. And that’s saying something because I come from the I come from the land of the water where, it gets over the county road pretty frequently when it rains.

00;00;54;26 – 00;01;00;06
Riley Smith
And, when you see it about seven foot in the middle of the county road, you know that that’s a lot of water.

00;01;00;09 – 00;01;13;15
Dr. Hunter Biram
That’s insane. Whenever, so Annie and I went to help my mom do some moving, over that weekend. And as we were coming through Jacksonville, we looked over and I think those are it’s either baseball and or softball complex on the right right there.

00;01;13;16 – 00;01;14;22
Riley Smith
Jacksonville. Yeah.

00;01;14;22 – 00;01;25;16
Dr. Hunter Biram
Dude, the water was so high that it like, went up to that yellow plastic guard that’s on top of the chain link fence. That’s I was like, man, that is feet. That is feet so high.

00;01;25;17 – 00;01;44;29
Riley Smith
Funny you said that. I come by that same place but on the north side of it, and instead of the west side of it going down the interstate, that little road that goes right by, like where you would actually pull into the complex. Yeah. The only thing that was out of the water was the actual parking lot, like the gravel parking lot.

00;01;45;00 – 00;01;48;03
Riley Smith
Oh, wow. That was it. The rest of the ball fields were underwater.

00;01;48;03 – 00;02;03;06
Dr. Hunter Biram
Totally underwater going, and it took about a week for it to come off. I mean, I think so whenever we went, we had to go back to to the farm on Sunday. So about a week later and it it was still pretty high. But I mean, it wasn’t on the field, but I mean, it was it took a long time for that water to come off.

00;02;03;12 – 00;02;19;12
Riley Smith
I don’t know what it looks like at the farm. I haven’t been down there. And, since we. Because we had to go to our cabin, put everything up on on chairs, because we thought it was going to get in our cabin again. And it hasn’t done that since, I believe 2010 or 2011, when we had that.

00;02;19;12 – 00;02;38;25
Riley Smith
You know, I think I called it a million year 1000 year flood or whatever it was. It got up to the receptacles. We thought that was going to happen again. So we went down there and put everything on furniture. Some furniture was on, furniture off the floor and anyway we had to cross my cousin’s place to get to it.

00;02;38;25 – 00;02;50;20
Riley Smith
And so we were worried about how long it’d be till we could get to the house. And I think then it’s off the county road. We can get to the house now. Going past it. You still don’t think you can drive it?

00;02;50;22 – 00;03;12;20
Dr. Hunter Biram
Yeah. So, I mean, really a lot of water. I mean, for for for three days it pretty much rain straight and, on one day, I think on the April the 5th, it rained about six inches. Both reported at Memphis and and little Rock. Just to kind of give you an idea of our, of our area of where we’re talking about, we’re talking about mostly East Arkansas, where most of our row crop production is going to be.

00;03;12;20 – 00;03;37;14
Dr. Hunter Biram
And both of those, National Weather Service stations, they, they report about six inches of rain on the fifth. And, if you look at the, the I think it’s like a 20 year normal, on the National Weather Service website. Cumulatively, there should be around six inches. That happens between January, February and March. Six inches is what the the the normal is.

00;03;37;16 – 00;03;40;16
Dr. Hunter Biram
Right. And, we we saw that in one day. Yeah.

00;03;40;17 – 00;03;40;27
Dr. Hunter Biram
So that just.

00;03;41;00 – 00;03;44;27
Dr. Hunter Biram
Gives you an idea of like how much rain fell on the fifth.

00;03;45;00 – 00;03;52;27
Riley Smith
Right. And the amount of, damage that was done not just by flooding either. I know Lake City got hit extremely hard with the tornado.

00;03;53;03 – 00;03;55;02
Dr. Hunter Biram
Oh my goodness, I know, so sad.

00;03;55;02 – 00;04;17;04
Riley Smith
And, there’s been there was a lot of storm damage done prior to the flooding. And then we went from, I mean, we went from one extreme to the next. And I think I said this in the last episode, you know, we were in an extreme drought, burn ban on for the whole state of Arkansas. And then then we had tornado damage, and then we ran right into flash flooding.

00;04;17;06 – 00;04;21;22
Riley Smith
And, so nobody we cannot catch a break now.

00;04;21;22 – 00;04;53;29
Dr. Hunter Biram
And it’s I mean, this is a very important time in terms of, agricultural production, especially with crops. And that’s what we’re gonna talk about today and just, you know, where we are, in planting season and looking at these, crops that, you know, or in the earlier planting window, which would, you know, be corn and rice, and there have been some beans that have been planted and, but really, no, no cotton, no peanuts, and, and talking to our specialist, and so it seems like, you know, I think rice and corn were leading the way in terms of, planting progress.

00;04;53;29 – 00;05;13;00
Dr. Hunter Biram
And anywhere between 20 and 30% of the crop, being planted. And, so, you know what we ended up doing, in this report that we’re going to go into great detail with here is just, you know, one of our agronomists, he surveyed our county agents. So we looked at 32 different counties, across East Arkansas.

00;05;13;00 – 00;05;40;24
Dr. Hunter Biram
And there’s a couple other counties in there to what? And we’ll include this in the newsletter. But across 32, counties, we looked at reported, planted acreage so far and route and reported, flooded acreage so far. And, you know what? What we end up seeing was that there was about 840,000 acres, that had been planted that have been reported planted at least so far.

00;05;40;26 – 00;06;00;12
Dr. Hunter Biram
And, among those planted acres we’re looking at, close to 40% of those being flooded. And so, quite a bit, flooded. Now, now, I do believe that number, that 41% is it was if the if a field was ever flooded, then we had another measure that said, okay, well, if it was still flooded on the April the 7th, what did that look like?

00;06;00;12 – 00;06;25;16
Dr. Hunter Biram
And that percentage was like more like 31%. But still you’re looking at close to a third of planted acreage so far being flooded, after, you know, standing there for, for three days. So pretty, pretty significant weather event. And that, you know, that’s going to, constitution replant, that’s going to constitute price and prevent plant. And in the case of wheat, which, you know, in winter wheat season, we’re actually this is we’re actually in the heading stage of wheat.

00;06;25;16 – 00;06;26;22
Dr. Hunter Biram
So it’s already emerged.

00;06;26;22 – 00;06;45;01
Riley Smith
That that was going to be one of my questions was, is that I know that, you know, we were talking about replant pre plant. He talked about because we’re in the we’re in you know the full swing of planting season. Right. So but you had to stop and think that, you know, those guys were getting ready to cut wheat here.

00;06;45;01 – 00;07;05;06
Riley Smith
And another what month? Probably a month and a half. You know, in a may 1st June, they’re going to start cutting wheat. And, you know, how how does that look economically? Yeah. Damaged wheat and and what the what the the, economic analysis on the replant pre plant looks like. Yes.

00;07;05;06 – 00;07;19;23
Dr. Hunter Biram
So we’ll just start with wheat right there. And we were you know, Ryan and I visited with our a wheat wheat agronomist and you know, he said pretty much just chalk it up to if that water hit those fields were flooded for wheat. Just called a complete loss. I mean, there’s not a whole lot you can do with that.

00;07;19;23 – 00;07;40;00
Dr. Hunter Biram
Oh, so on those flooded acres for wheat, what we did was to, to calculate the extent of that loss, we looked at the foregone value. And so what we mean by that is if a farmer could have cut the wheat and harvested it and sold it and marketed it, how much would that crop value be? And that’s $7.6 million just right there.

00;07;40;02 – 00;07;57;24
Dr. Hunter Biram
And then when you look at the, cost of production, you’re looking at around, I think it was around ten, ten yet, but about $10.5 million in terms of sunk cost. What we mean by the cost is you’re not going to get any return on that investment. I mean, you put all those costs in on those flooded acres and you couldn’t get anything out of them.

00;07;57;24 – 00;08;14;18
Dr. Hunter Biram
So that’s sunk cost. So, you know, we’re looking at around $18 million just on wheat alone. So that’s on the, you know, on there, you know, we is a special case here. But, you know, looking at rice, soybeans and corn is a little bit different because the crop had not emerged and there was just planting that was going on.

00;08;14;18 – 00;08;33;24
Dr. Hunter Biram
And so we ended up using our crop enterprise budget to figure out, you know, what is what is that cost of replanting? You know, and so if we’re comparing between two states of the world, a flood state versus a non flood state, we’re just going to be focusing on what’s going to be unique about the the flood state of the world that’s going to be replant and, you know, remaking beds and things like that.

00;08;33;24 – 00;08;56;19
Dr. Hunter Biram
And so we ended up adjusting our cost items, in our, our enterprise budgets. And so we adjusted those and I’ll include this in the, in the newsletters to give you an idea of what costs were included. But, you know, we’re looking at corn, replant expensive, for of around $200 an acre, rice of about $188 an acre, and soybeans about $134 an acre.

00;08;56;21 – 00;09;25;10
Dr. Hunter Biram
And so then we would multiply that value times the impacted acres. So, you know, in terms of what was reported by the county agents, corn reported about 56,000, flooded acres, rice, about 111,000 acres, soybeans, about 72,000 acres. And so whenever you look, line item corn, soybeans or corn, replant expense of about 11.4 million rice, about 21 million soybeans, about, 9.7 million.

00;09;25;12 – 00;09;53;01
Dr. Hunter Biram
And so when you look at those, when you look at those, line items and you add all those together, what we’re going to be looking at is, replanting expenses on the flooded acres of about $58 million. So you got 58,000,018 million. So just right there, you’re looking at around 76, $76 million or. Sorry. Yeah, yeah, about $76 million.

00;09;53;04 – 00;10;01;16
Dr. Hunter Biram
So massive losses to account for here. You know, with wheat and with, planting expenses.

00;10;01;18 – 00;10;10;14
Riley Smith
Can I talk about, the crop insurance losses real quick? Summary of business, if you wouldn’t mind, I will.

00;10;10;14 – 00;10;32;11
Dr. Hunter Biram
And actually, I want to walk back my, previous statement, so I apologize. I’m gonna do some math on the fly here. So if you do on the corn losses, $11.4 million in rice, you do 21 million, and then soy, you do 9.7 million. Okay, that’s 42.1 million. Okay. I thought that number was kind of hard. My mental math was wrong on that.

00;10;32;11 – 00;10;40;13
Dr. Hunter Biram
So 42.1 million plus the 18 mil. Okay, so now you’re looking at the crop side without the crop insurance and then getting the crop right, right, right of about $60 million.

00;10;40;13 – 00;10;40;29
Riley Smith
Right.

00;10;41;01 – 00;10;51;12
Dr. Hunter Biram
So then the remaining amount of the losses are going to primarily be coming from crop insurance. And so what I mean by that is it’s going to cost the crop insurance company some money to pay an indemnity out.

00;10;51;18 – 00;11;11;08
Riley Smith
But your your crop insurance, man. So yeah, in that in that scenario, in this, in this situation, would this be how would it what would it take to be considered catastrophic.

00;11;11;10 – 00;11;16;17
Dr. Hunter Biram
Good question. I think RMA defines catastrophic as you lose more than half of your half of your crop.

00;11;16;22 – 00;11;23;10
Riley Smith
Is that is that it. I’m not I’m not trying to walk you out on the limb here, but is that highly possible.

00;11;23;12 – 00;11;27;20
Dr. Hunter Biram
You know, I mean, I’m not going to say it’s not impossible. Or.

00;11;27;20 – 00;11;30;04
Riley Smith
Is it just because it’s way too early?

00;11;30;06 – 00;11;48;16
Dr. Hunter Biram
It is a little early. I think we’re at a at a place now where, you know, people are going to be able to go out there and still plant. Now, the, the crux of this, though, that we’ve talked about that, Ron, I’ve talked about with our, with our agronomists is RMA has this early planting date.

00;11;48;18 – 00;12;06;22
Dr. Hunter Biram
So that means that you have to have planted your crop after the early planting date to be eligible for replant coverage. And so what we’ve seen is there’s actually been quite, quite a bit of early planting. And what I mean by that is before April the 1st. So that’s problematic when it comes time for getting reimbursed for replant costs from the insurance company.

00;12;06;29 – 00;12;35;04
Dr. Hunter Biram
That’s not counting the seed. Count me the seed companies. That’s very specific to to to each relationship. For a farmer and seed company. But what’s key here is if a farmer planted before April the 1st, they’re not going to be eligible for replant indemnities. It could be problematic. So what will likely end up happening is a lot of this ground could be prevent plant is will end up happening because of, you know, farm men there could still be water under or fields under water right now.

00;12;35;04 – 00;12;56;00
Dr. Hunter Biram
And as rivers and as the bayou made it out southeast Arkansas, as they increase and as they crest, we’re going to continue to see more flooding happening. So, I mean, we are not done with this. I mean, these estimates are very preliminary. We are not done here. But that’s that is a concern. Like you’re not getting replant, and then prevent plant being, the payments that are sent out.

00;12;56;00 – 00;13;19;00
Dr. Hunter Biram
So it’s going to prevent plant or failed acres would be another way that the money would be paid out. So with prevent plant primarily in failed acres, you know, we’re, we’re, we’re, projecting that around. I think it’s around 17. Okay. About about 19 ish million dollars, $18.7 million in crop insurance indemnities paid to producers because of this flooding event.

00;13;19;04 – 00;13;29;00
Riley Smith
Okay. Was there any kind of talk about, I know that y’all been talking with the agronomist. Was there any talk on seed shortage?

00;13;29;02 – 00;13;35;02
Dr. Hunter Biram
Good point. Glad that you brought that up. So I’ve heard that maybe in rice that’s going to be an issue.

00;13;35;05 – 00;13;42;04
Riley Smith
Now is that mainly going to be on medium grain. Because me and Scott talked about how the medium grain picked up over the long grain.

00;13;42;06 – 00;13;54;04
Dr. Hunter Biram
I’m not sure. But you know, between medium and long. But the comments that I’ve heard is just that. Yeah, generally I think just, you know, probably between medium and long, it’s going to be difficult to fence, right, to replant rice.

00;13;54;07 – 00;14;35;26
Riley Smith
Because, I believe during our, perspective plantings discussion that there was some seed companies did kind of hold back or I guess decrease that, availability. Not really availability. What’s the word? They didn’t make as much seed for this year. Yeah, yeah. So I was kind of concerned about that as far as going in to this, you know, these damages, if they have to include a lot of pre plant or replant, then what’s the case of, you know, they’re going to have a seed shortage on a specific commodity or a specific crop, you know.

00;14;35;26 – 00;14;46;02
Riley Smith
And then now now you’re, you know you know stress out. Is it one seed company. Is it all seed companies. You know I guess that was my curiosity. Yeah.

00;14;46;04 – 00;15;00;06
Dr. Hunter Biram
You know, I wouldn’t know like by a company. But I do have an industry contact who, you know, tells me that, he’s expecting some replanting on rice. Rice can handle a lot of stress. I mean, you know, we flood irrigate it. So, I mean, you can handle a lot of stress. And, you know, Jared Harkey is also.

00;15;00;06 – 00;15;17;09
Riley Smith
So that’s what I found interesting, too, on the you were talking about rice and they were at Impact Acres was 111,000. And you know, my theory on that would be is because we do flood rice, they’re going to be in your lower land. Yeah. Lower ground areas.

00;15;17;09 – 00;15;19;03
Dr. Hunter Biram
Yeah. More clay ground.

00;15;19;05 – 00;15;29;22
Riley Smith
So they’re going to be in there longer. More of, water based ground is what I’d call it. Where is your corn? Is going to be in your better ground, your higher ground. For your irrigation and soybeans.

00;15;29;22 – 00;15;31;01
Dr. Hunter Biram
Yeah, absolutely.

00;15;31;01 – 00;15;37;28
Riley Smith
Soybeans are a little bit more, flexible when it comes to soil type corn. You got to have good ground to grow corn.

00;15;38;01 – 00;15;57;02
Dr. Hunter Biram
Yeah. That’s a good point on. That’s a good point on on rice seed. I mean, I, you know, from what I’ve heard, there is short supply and more can come up out of the South. So if we can get more out of, Louisiana, for instance, maybe, maybe, but I’m not entirely sure. Corn, you know, less concern on corn.

00;15;57;02 – 00;16;07;25
Dr. Hunter Biram
I mean, I have heard some concerns about corn, but not to the extent that I’ve heard on rice. And, you know, soybeans. I don’t think there’s gonna be much of an issue. I think since the replant will happen, I think we’re going to be worried about.

00;16;07;25 – 00;16;17;22
Riley Smith
Well, economically, do you have any kind of wrap up or conclusion, anything lastly, I guess, finishing touches you’d like to point out before we call it wraps?

00;16;17;27 – 00;16;37;20
Dr. Hunter Biram
Absolutely. I think the main takeaway here, if you if you tuned out and you’re tuning back in, to this right now, just know that this is a preliminary estimate of around $79 million. You know, we are leaving out a few things, you know, because this is not a perfect analysis. We think we we we think this is a very conservative estimate.

00;16;37;23 – 00;16;56;21
Dr. Hunter Biram
You know, we are not accounting for things like, yield loss from late planting because we know that as you push that planting window back, your yield potential falls. So that’s one thing that we should be accounting for. And, you know, damage to farm structures like grain bins. What about grain has been already did the water get have to where maybe some of that grain money.

00;16;56;25 – 00;16;58;18
Riley Smith
Had to throw equipment in there to.

00;16;58;19 – 00;17;22;29
Dr. Hunter Biram
Equipment? Very much so that, you know, replacing equipment and servicing that particular equipment that got under water. You know, so there are things that we are leaving out. I mean, not intentionally, it’s just we just don’t have the data for it, I think. So, and this is a conservative estimate against $79 million. You know, with about 60 of that coming from these replant losses and from the losses to wheat, because it’s in that close to harvest stage.

00;17;22;29 – 00;17;25;02
Dr. Hunter Biram
And then you have the insurance losses thrown in there, too.

00;17;25;03 – 00;17;47;10
Riley Smith
Something I kind of want to throw here on the end. You know, you were talking about losses that we we haven’t accounted for, one that you probably haven’t even thought of that I’ve been hearing a lot of from my friends is, is washouts all the reservoir levies. We had one yesterday. Our neighbor his his big reservoir, he had a washout in his levee and lost over half his water already.

00;17;47;10 – 00;17;48;15
Dr. Hunter Biram
Oh my goodness.

00;17;48;22 – 00;17;58;07
Riley Smith
So, I mean, how many times does that happen on somebody where, you know, they had their reservoir was already full. Yeah. And had a weak spot and blew out a levy.

00;17;58;07 – 00;18;00;20
Dr. Hunter Biram
You ain’t got the water. Oh you’re going to be up the creek.

00;18;00;20 – 00;18;03;24
Riley Smith
I mean you’ve got to get it rebuilt and catch water again.

00;18;03;26 – 00;18;04;22
Dr. Hunter Biram
Expense to rebuild.

00;18;04;24 – 00;18;18;13
Riley Smith
Or you’re going to have to run more diesel on a power unit and pump it up out of, you know, kind of relieve pump it up out of whatever canal or branch that you got next to it. So yeah, that’s another thing that, that probably hasn’t been accounted for.

00;18;18;13 – 00;18;24;20
Dr. Hunter Biram
No, we hadn’t thought about that. That’s a good point, though. That’s, so yeah, this is a very conservative estimate, $79 million, very concerned.

00;18;24;22 – 00;18;30;17
Riley Smith
This is more or less just looking at what the damage the true damages are to a crop.

00;18;30;19 – 00;18;34;22
Dr. Hunter Biram
Yeah. I think this is this is likely a lower bound. This is a lower bound on it.

00;18;34;22 – 00;18;42;05
Riley Smith
Yes. So anyway, well, Doctor Biram I appreciate it. You coming in and discussing this and giving us an update on it.

00;18;42;12 – 00;18;43;21
Dr. Hunter Biram
Well, as always, thanks for having.

00;18;43;21 – 00;19;11;05
Riley Smith
Me about it. Absolutely. Well, everybody, stay tuned for more market report. Thanks. All right guys back with your market report May 25 Corn, current prices at $4.84 per bushel, month agos prices at $4.61 per bushel. That’s up $0.23, year agos price at $4.30 per bushel. That’s up $0.54 May 25 Rice current price is at $13.40 per cwt, a month ago.

00;19;11;07 – 00;19;41;10
Riley Smith
prices at $13.48 per cwt. That’s down $0.08 and a year ago prices at $18.83 per cwt. That’s down $5.43. May 25 Soybeans current price at $10.39 per bushel, month agos price is at $10.16 per bushel. That’s up $0.23. And a year agos price was at $11.50 per bushel. That’s down $1.11. July 25 Wheat current price is at $5.61 for bushel.

00;19;41;12 – 00;20;07;11
Riley Smith
month agos price is at $5.85 per bushel. That’s down $0.24 and a year agos price is at $5.52 per bushel. That’s up $0.09. May 25 Cotton current price is $0.66 per pound. A month ago, price was at $0.67 per pound. That’s down $0.01 in a year ago prices at $0.80 per pound. That’s down $0.14 weekly. U.S. average peanuts current price is at $514 per ton.

00;20;07;11 – 00;20;38;29
Riley Smith
A month ago, prices at $502 per ton. That’s up $12 and a year agos price is at $564 per ton. That’s down $50. And that’s your weekly commodity futures this week. Your fertilizer prices this week, urea is $548.33 per ton. Ammonium nitrate is $480 per ton, ammonium sulfates $541.25 per ton. DAP is $762.25 per ton. Triple super phosphate is $685.67 per ton.

00;20;39;01 – 00;21;09;25
Riley Smith
Potash is $448.75 per ton. AG lime is $50 per ton, and Pellet lime this week is $237.65 per ton. Your diesel prices this week. Off road diesel is $2.45 per gallon. Highway diesel is $3.26 per gallon. And your Mississippi River level at Memphis, Tennessee this week, current levels at 37.4ft and a year ago was at 21.9ft. Want to thank you again for joining in on another episode of Morning Coffee and Ag Markets.

00;21;09;25 – 00;21;16;11
Riley Smith
We hope you enjoyed it and enjoyed your morning coffee this morning as you tune into another episode. So until next time, we’ll catch you.

00;21;16;11 – 00;21;32;12
Riley Smith
On the flip flop. Bye bye now.