By David Forest, editor, International Speculator
On June 13, the Mississippi River dropped below flood stage for the first time in 85 days.
That smashed the previous record in Dubuque, Iowa by an incredible 51 days.
Cars were completely underwater. Streets were flooded. Highways were cracked, and acres of farmland were drowning.
Scenes like the one in the picture below, taken on May 2, 2019 in Davenport, Iowa, have been all too common in the Midwest in 2019:
Source: Kevin E. Schmidt, Quad-City Times, Associated Press
Whether or not you think this is the result of climate change… we can all agree that the weather is doing some wild things.
Between the rain, tornadoes, snow, and fires, one of the most important commodities sectors on the planet has been hit – hard.
And that’s agriculture.
Extreme weather is just one of the factors contributing to an impending record-breaking shortage. The others include a nasty pest decimating Chinese crops… and a deadly disease ravaging China’s pigs.
Global chaos is erupting in agriculture… just as prices hit a 42-year low.
Combined, it’s the perfect one-two punch that will lead to commodities prices rising to levels not seen in years.
This spells a profit opportunity for us… especially because this is a space zero mainstream investors are watching.
But that’s why we’re here. Our job is to find you the disruptions in the commodities markets that will lead to big profits. And one of our favorite ways to do that is by being a contrarian: buying into extremely depressed resources or industries that everyone is avoiding… and riding them as they inevitably shoot higher.
Time and again, it’s proven to be the lowest-risk, highest-reward way to make money.
And frankly, I can’t think of any other resources more depressed than agriculture right now.
A Depressed and Boring Market… Until Disaster Struck
It makes sense you haven’t heard much about agriculture lately. Frankly, it’s boring. Soft commodities like corn, wheat, soybeans, sugar, and coffee have been in the tank. The chart below shows the relentless price decline since 2012:
That’s a seven-year downward spiral. It shook out even the most committed traders.
There hasn’t been much to get excited about in softs. Global supplies have surged. Wheat stockpiles, for example, rose nearly 100% since 2012… Corn and soybean stockpiles have grown well above normal levels, too.
This means prices fell significantly.
And it looked like 2019 would be the same in terms of oversupply. In corn, for example, everyone expected U.S. farmers to plant 4 million acres more than last year.
On May 10, the government agreed there would be more corn than we’d seen for over 30 years.
Then, as we showed you above, the rains came.
The snow actually came first. In March, a “bomb cyclone” blanketed the Midwest.
By April, that snow melted. Rivers like the Mississippi and Missouri rose – and flooded. In May, the Mississippi rose to its highest recorded level. And the rivers are just starting to go down.
Levees in key corn states like Iowa and Illinois overflowed – or burst completely. Many corn farmers were completely underwater.
Corn farmers were supposed to be planting at a record pace. Instead, the industry has been paralyzed by the extreme weather.
On May 20, officials at the Department of Agriculture realized how bad it was, releasing a report that said only 49% of planned corn acreage had actually been planted. Usually by mid-May, 80% of U.S. corn is planted.
Farmers were way behind. Some states like Illinois had less than 25% of crop in the ground.
Prices turned on a dime. Corn has surged 18% since mid-May. Wheat jumped nearly 17%, and soybeans rose nearly 12%.
The situation got worse. A Bloomberg survey at the end of May found 6 million acres of U.S. corn may go unplanted this year. The chart below shows America’s farms are way behind:
Six million acres of lost corn would be double the previous record. The situation is so bad, it’s gained its own hashtag on Twitter: #noplant2019.
It’s an unprecedented disaster for farmers. It also suggests major shortages coming in supply. Especially given what’s happening right now on the other side of the world…
Killer Disease and Plagues of Vermin
America’s epic flooding isn’t just bad for U.S. food buyers. It’s a big problem for consumers around the world.
A lot of people don’t realize it, but the U.S. is one of the world’s largest agricultural exporters and is the world’s largest grower of corn and soybeans.
The Philippines – a top-five importer of wheat – gets over 40% of its wheat supply from American farms.
And an increasing amount of corn and soybeans goes to China, in spite of any trade war.
Chinese buyers have been looking to up purchases of U.S. grains because of the nasty pest we mentioned above. It’s a tiny, but devastating, problem sweeping the country called the fall armyworm – and it feeds on corn, soy, sugarcane… almost anything in its path.
Armyworm plagues appeared in Africa and Southeast Asia in 2016. Early this year, they were spotted in China for the first time.
On May 19, reports suggested the armyworm was headed for China’s corn belt, and in early June, officials confirmed it.
China expects the plague to arrive any day. To prepare, the Chinese government began releasing emergency corn supplies from stockpiles. Local corn futures spiked to a four-year high.
No one knows the coming effects. But a recent report said China’s farmers are completely unprepared… Most are too poor to afford pesticides, and even if they had the chemicals, they don’t have the training to use them.
Local officials called for U.S. corn imports to fill the looming gap (although the escalation of the trade war could crimp those plans).
The armyworm on its own might not raise demand for U.S. corn… but added to the swine fever outbreak ravaging Chinese pigs… there’s a good bet it will.
African swine fever was first spotted in China last August… and according to estimates by top agricultural lender Rabobank, some 200 million pigs across China will be wiped out.
That’s 30% of China’s swine population – and more pigs than the U.S. and Europe raise combined.
Even before the outbreak, China was the world’s third-largest importer of hogs. And with domestic production decimated, China’s pork imports are now going through the roof:
China’s increased pork imports are coming from the U.S. In the first five months of 2019, American pork shipments to China jumped 1,000%. That’s 234,000 tonnes of U.S. pork going to China – compared to just 20,000 tonnes last year for the same time frame.
That’s bullish for hog prices. But it’s also big for grains because now, U.S. producers are raising hogs as quickly as they can to meet increased Chinese pork demand.
And all of those pigs U.S. producers are raising eat corn.
That means a big rise in demand for corn feed – coming just as the U.S. corn industry is being crushed by flooding.
The U.S. corn sector has gone into panic mode… U.S. corn buyers are so desperate, they’re now importing corn from Argentina and Brazil (according to late May reports). Industry insiders say this has never happened before. As one trader put it, “This smoke makes me think that there is a big fire somewhere.”
That big fire is a record-low U.S. corn crop, combined with a never-seen rise in demand for pigs. That’s a perfect one-two punch for prices.
Now’s the Time to Bet on Soft Commodities
This takeaway is clear: The next several months could be very good for corn, wheat, and other grains.
Now’s the time to gain exposure, before prices take off.
We recommended a way to buy into all of these markets with a single investment in my International Speculator newsletter. (Subscribers can access our pick here.)
If you’re not a subscriber, you can access this play by signing up for International Speculator today. You can learn more about a subscription – and another big opportunity I just uncovered – by clicking here.
Editor, International Speculator