Torrential rains, flooding, droughts and searing heat sound like an apocalypse in the making, but they're all part of the normal risks facing agricultural commodities each crop season and lately, every day.
"Farmers have been dodging bullets with Mother Nature these last few years," said Kevin Kerr, editor of Kerr Commodities Watch. "It's inevitable that we will eventually get a growing season of severe heat and drought or disease -- that year may be here."
The risks to U.S. crops this year have helped futures surge recently.
After declines in recent weeks on a broad pullback in commodities, corn, wheat and soybeans are poised to finish this week sharply higher.
Corn and wheat prices had suffered last week after the U.S. Department of Agriculture came out with larger-than-expected ending stocks estimates for 2011-2012, said Todd Hultman, president of DailyFutures.com. "Since then, it seems more likely that those estimates ignored obvious weather problems for both grains that are not going away easily."
Flooding along the Mississippi River is the first weather-related problem that comes to mind. But there has also been Delta flooding and wet conditions in the Ohio Valley and a drought in Texas, Oklahoma and Kansas.
"The Mississippi concern is just the latest in a series of variables with upside price shock potential," said Alan Knuckman, managing editor of the Resource Trader Alert.
The high river levels and the opening of the Morganza Spillway for flood control may impact nearly 300,000 crop acres, which could translate into $200 million in damages, according to Louisiana State University AgCenter Economist Kurt Guidry.
"Areas that were flooded before they were planted may have to look at alternative crops if the ground ever dries out," said Darin Newsom, a senior analyst at Telvent DTN.
And "areas that saw early planting now have newly emerged crops standing under water," he said. "These acres will likely drown, and will either need to be replanted if and when the ground dries out sufficiently, replanted to an alternative crop or abandoned."
This comes at a key time for corn, soybean, cotton and spring wheat, said Newsom.
Planting progress has been slowed by rains and flooding over much of the Northern Plains, Midwest Corn Belt and Delta, he said, and the winter wheat crops in the Southern Plains have been irreparably damaged by a drought that started last fall.
"With the world needing the U.S. to have large crops this year, the biggest challenges are coming early," he said. A "critically" dry situation that's emerging in parts of Europe where wheat is grown has contributed to a "tough" world situation, so world supplies will not be rebuilt, as expected, by the U.S. crop.
The chain reaction in agricultural commodities isn't likely to end anytime soon, as past and current weather woes slow crop progress ahead of the summer heat and winter frost.
"Corn, bean and spring wheat crops are all behind normal in planting," said Jeff Coglianese, senior broker at Daniels Trading in Chicago, pointing out that flooding along the Mississippi along with the wet conditions in Ohio, Indiana and the Red River Valley caused the bulk of these delays.
In Ohio, for example, USDA data show that 7% of corn has been planted in the state as of the week ending May 15, compared to 83% at this time a year ago.
The amount of corn crops planted that have actually emerged is also strikingly low. In Ohio, only 1% has emerged as of the week ended May 15, compared to 57% a year ago. In Wisconsin, none have emerged, compared to 28% a year earlier.
In some areas, planting is behind by about 20%, said Kerr, noting that many farmers may have gotten corn seed in the ground, but they're not emerging and that means the crops will be delayed.
If the corn doesn't have a mature root system when summer rolls around, it will not be able to handle the heat, he said, and wheat and soybeans have similar problems.
"If we see continued wet weather and come up significantly short of the USDA projected 92.2 million acres of [planted] corn, we have the potential to make new all-time highs," Coglianese said. "Right now, the corn and bean markets appear headed for a test of their March highs."
Among the big challenges for crops this year, corn and wheat will need "near perfect" growing conditions since they have little or no margin for error in production this year, Newsom said. But "given the lateness of planting, an early frost, particularly in the northern tier of Midwestern states where corn acreage was expected to increase the most, becomes a stronger possibility."
And as the summer approaches, "we are overdue for a drought," said Kerr, noting that farmers have been very lucky the last several years."
Looking further out, the multiyear impacts of the Mississippi River flooding is unknown.
"There is some concern of sediment deposits impacting the usefulness of land for agricultural production in future years," said LSU AgCenter's Guidry, in a recent report. "The exact nature of this issue will not be known until flood waters recede."
The risk levels for each of the agricultural crops vary under these challenging weather circumstances.
"All of the agricultural markets have a bullish undertone because the harvest is a long, long way with many hurdles to overcome," said Resource Trader Alert's Knuckman. "The constant weather pressures of too wet/dry or too hot/cold create a bullish undercurrent that will only be voided by substantial production to rebuild stockpiles."
The drought in the southern Great Plains has hurt wheat, and crops most affected by the rains are corn and rice, said Jack Scoville, vice president at Price Futures Group in Chicago. Arkansas has seen a lot of rain and flooding, and the No. 1 rice state is running out of time to plant rice, he said.
So rice is among the agricultural commodities likely to see the best performance.
Rough rice futures trade around $15 per hundredweight. A hundredweight is equal to around 100 pounds. Prices stand about 10% below the highs seen earlier this year, but have also gained about 10% in the past week.
"Tornados and Mississippi River Valley flooding [has done or is doing] lots of damage to U.S. rice production," said Ned Schmidt, editor of the Agri-Food Value View report. Thailand has announced plans to reduce rice crops and Japan's has lost production due to the tsunami and radiation fears "real and imagined."
Corn is another commodity likely destined for higher prices.
Scott Capinegro, president of Barrington Commodity Brokers, said corn could lose 1.1 million acres or more as flooding in the Eastern Corn Belt and Mississippi River slow down the planting progress for the crop.
Late planted corn will pollinate long after the fourth of July and "into the heat of the summer," he said--then the corn crop will need to worry about early frost.
The market won't even know for sure how many corn acres get planted until June 30, said Hultman, though that "doesn't keep us all from guessing in the meantime."
"Just about everything [will] have to go well from this point forward for spot corn prices to stay below $8" a bushel, he said.
Meanwhile, planting delays for corn and rice in the U.S. will "lead to more soybeans getting planted as soybeans have a longer planting window by far than the other two," Scoville said.
Global supplies of soybeans have been increased because of large South American production, according to Newsom, but given that global demand is expected to grow, the U.S. crop still needs to be big.
So right now, it's all about guessing what Mother Nature will do next.
Around June 30th would be a good time for traders to "tread lightly," according to Hultman. That's the day the USDA releases its annual acreage report.
"That USDA report has a history of surprising shocks that were hard to guess before hand," he said.