The Midwest Floods, the Trade War and the Swine Flu Pandemic: The Agricultural and Food Super Storm is Here!

In May 2019, for the second time in three months, Central U.S. is hammered by record-breaking floods. Those floods are impacting Oklahoma, Arkansas, Missouri, Illinois, Nebraska and Iowa (Susannah Cullinane, Hollie Silvermane, Sheena Jones, “Central US reels from week of deadly weather”, CNN, May 26, 2019). In Van Buren, Arkansas, the Arkansas River level reached 38.3 feet, breaking the 1945 record at 38.1. Those floods follow the historical ones of March 2019 (Jean-Michel Valantin, “Bomb Cyclone on the Midwest: Floods, the Trade War and the Coming Agricultural Super Storm”, The Red (Team) Analysis, April 15, 2019).

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In-between, the season has been unusually wet. As a result, already battered farmers face mammoth problems to plant the 2019 crops of corn and soy. In the middle of these extreme conditions, Texas, Tennessee, Arkansas, Louisiana and Oklahoma are going through an exceptionally violent tornado season. For example, on 24 May 2019, Jefferson City, the state-capital of Missouri was devastated by a monster tornado, almost a wide mile, with peak winds reaching almost 160 miles per hour. On the morning, the city was in ruin (“Tornado That Ripped Through Jefferson City, Missouri, Rated EF3; Nearly 2 Dozen Injured », Weather.com, 23 May, 2019).

These events take place after the deep and lasting damages the March 2019 catastrophic floods generated. However, these very impressive destructions are only the visible dimension of the unfolding “long catastrophe” that comes in their wake. That long and complex catastrophe emerges from the combination of the slowdown of agriculture induced by the historical series of extreme weather events on the farm belt with the US-China trade war (Valantin, ibid).

Those, furthermore, combine with the rapidly spreading pandemic of African swine fever. The pandemic started in August 2018 has killed at least one and half million pigs in China and is now expanding in Asia (Dennis Normile, “African swine fever keeps spreading in Asia, threatening food security”, Science, May 19, 2019). Among a cascade of agricultural and food consequences, the decreasing number of pigs entails a diminution in soybean demand, as soy products are part of pigs’ diet (From Bloomberg, “How China’s swine fever outbreak is upending the soybean markets”, The South China Morning Post, 15 April 2019).

Is this extremely violent combination of climate, international and sanitary factors creating a very peculiar kind of pressure on the Midwest? As a result is the status of the Midwest in a globalised economy questioned?

In order to answer these related questions, it is of paramount importance to understand that those events also signal that we are entering in an age of permanent change, necessitating a constant adaptation to climate change and the consequent “long emergency” era (James Howard Kunstler, The Long emergency, surviving the converging catastrophes of the twenty-first century, 2005).

The Midwest as the catastrophic frontier

Floods and tornadoes as sustainable catastrophe

Since March 2019, the Midwest has been through a situation that we qualify here as “the long catastrophe”. It started when, between 14 and 20 March 2019, a historically powerful “bomb cyclone”, combined with snowmelt devastated Colorado and Central U.S., especially the Midwest “farmbelt” of Iowa and Nebraska, South Dakota and Kansas (Phil McCausland, « Midwest flooding inundates farms, rural towns to threaten livelihoods and future“, NBC News, March 22, 2019).

Consequently, these weather events triggered immense floods, which wrecked more than a million of acres (405000 hectares). These floods have immediate direct consequences, because they drown arable lands, destroy crops stocks, roads, houses, motorways, railroads, bridges, barns, cars, trucks, etc. (Humeyra Pamuk, P.J Huffstutter, Tom Polansek, “U.S farmers face devastation following Midwest floods”, Reuters, March 20, 2019).

All along April and May, the situation worsened. Indeed, from April 2018 to April 2019, the region also faced the wettest 12 months in a row since 1895. Soaked soils cannot absorb water anymore, which flows in the flooding rivers, such as the Arkansas River, the Mississippi and the Missouri rivers. On 21 May, after 136 days, the Mississippi River flood broke the 1927 flooding record (Steve Hardy, “Mississippi River breaks 92-year old flood stage record; here’s when water could go down », The Advocate, May 21, 2019.

Towards a Midwest climate isolation?

Furthermore, this means that the combination of agricultural, commercial and financial loss is aggravating the transport infrastructure’s situation of the Midwest. Indeed, the river, railways and road heavy bulk transport are in a very bad shape, because of 30 years of insufficient management and investments. The floods are worsening the state of the vital infrastructures, when these connect the Midwest farmers to the world markets (David Hoppelman, ibid). This situation is aggravated by an historical series of tornadoes that devastated the Midwest, 13 days in a row (Amanda Schmidt, “May 2019 could be historic month for tornadoes after unprecedented twister streak finally ends at 13 days“, Accuweather, May 31, 2019.

The Midwest taken between the floods and the Asian pandemic

Delayed crops

This long catastrophe is devastating the Midwest agriculture. Only 49% of the corn acreage is planted, in sharp contrast with 78% in 2018 at the same time of year. The same can be said of soybean: 19% of acreage are planted, when 53% were planted in 2018. Going from bad to worse, only 5% of the soybean crop is now growing from the ground, against 24% in 2018 (“Crop Progress”, USDA, May 20, 2019).

As it happens, this follows the damages of the March storm series, and their impacts are so important because of the loss of stocks. Those have been accumulated since 2018, when the effects of the trade war launched against China led Beijing to heighten its own tariff barriers against U.S. soybeans, while lowering them in favour of the Brazilian production (Jean-Michel Valantin, “The US Economy, Between the Climate Hammer and the Trade war Anvil – The US Soybean Crop case”, The Red (Team) Analysis Society, October 8, 2018).

Destroyed crops

In other words, the floods have destroyed the unsold part of the 2018 crops, while endangering the 2019 crops. They also destroyed the potential financial capital the stocks could have been for the farmers. Furthermore, the floods neutered the taxes potential the sell of the 2018 stocks would have represented for the public sector and thus for the maintenance of infrastructures (Irwin Redlener, “The deadly cost of failing infrastructure in historic Midwest floods”, The Hill, 5 April 2019).

Enter Pandemic

As it happens, a new factor is further deeply upsetting the status of the Midwest soybean growers. Since August 2018, a pandemic of African swine flu attacked the Chinese pork industry, with its 400 million domestic pigs (Dennis Normile, Ibid.). A report by the third Dutch bank, Rabobank, suggest that in the worst case, up to 200 million pigs could be threatened (Orange Wang, Chad Bray, “China’s African swine fever outbreak and US trade war combine to create perfect storm for Chinese economy”, The South China Morning Post, 3 May 2019). This would represent more pigs than the total European and American park. Meanwhile, the disease is spreading to Vietnam, Cambodia, Myanmar, and Russia (Dennis Normile, Ibid.).

The importance of pork in the Chinese diet is paramount because it is the favourite meat staple of the 1,4 billion strong nation. Knowing that farmers are feeding pigs with soybean products, this turns China into the main importer of soybean. If Chinese pork production were to be lowered by 30%, then the demand of soybean could decrease by 4,2% according to HSBC, knowing that the Chinese epidemic and the Asian pandemic will last several years (Orange Wang, Chad Bray, “China’s African swine fever outbreak and US trade war combine to create perfect storm for Chinese economy”, The South China Morning Post, 3 May 2019).

Riders on the storm

In other terms, the already meagre 2019 Midwest soybean production is at risk of being impacted by lowering prices due to mass death of Asian pigs. This risk is induced by the constant mortality of Chinese and Asian pigs, while the U.S. soybean crop will reach a final quantity.

If the soybean and corn prices were to rise 2019, because of the delayed crops, one must wonder if this rise will actually balance the decrease in demand due to high rate pigs mortality in China, as well as in Vietnam, Myanmar, Laos and Russia. As it happens, the Brazilian soybean crops and export are at record levels, because of the weak Brazilian currency. (Roberto Samora, “Brazil crops soar as weak currency, high prices boost deal“, Succesful Farming, 30/05/ 2019). It must also be added that China puts favorable tariffs on non-U.S. soybean imports, as a reaction to the high tariffs it imposes on the US soybean imports, in the context of the US-China trade war (Jean-Michel Valantin, “The US Economy, Between the Climate Hammer and the Trade war Anvil – The US Soybean Crop case”, The Red (Team) Analysis Society, October 8, 2018). So, there could be an abundance of soybean on the international market, while the Asian demand is going to continue decreasing. This potential price pressure would then take place at the time of the 2019 succession of extreme weather events, and of the U.S.-China trade war. It must be added that infrastructure damages, through the destruction of barns, silos, roads, highways, river ways, is semi-insulating the Midwest from world markets.

Meanwhile, this happens at a moment of widespread weather impacts all around the planet, stemming from floods, cold, heat. For example, Australia, one the wheat world producer is now importing, because of a very poor crop that follows violent episodes of drought and floods (Colin Packham, “Australia to import wheat for the first time in 12 years as drought bites”, Reuters, May 15, 2019). 

Towards a global food prices crisis?

In other words, there are high risks that heightening tensions on the commodity and food markets will define the economic situation of the second half of 2019. In the same time, insurance and reinsurance companies are going to have to face the costs of the mammoth episodes of infrastructure and agricultural destruction in the Midwest.

It could be a new kind of agricultural, financial, food and social hybrid crisis. In a time of globalization, this crisis will spread … globally.

Errata 5 June 2019: We changed a sentence in the introduction where a grammatical error led to a confusion between the real number of pigs killed in China and the potential number that would be killed in a worst-case scenario. We now use the real number of pigs so far killed in China.
We clarified and detailed the source for the worst case scenario in the corresponding paragraph in the body of the text, corrected the number of domestic pigs in China and added estimates from HSBC.