"Exceptional drought" in southwest means more bad news for grain

  (Photo: Shutterstock)

(Photo: Shutterstock)

A large swath of the U.S. remains in extreme or exceptional drought. The region missed out on more than April showers. Less than 2 inches of rain has fallen across much of West Texas since last October, compared with an average of about 10 inches over the same period last year.

The exceptional drought in the Panhandle—an area dominated by agriculture—has more than doubled in size. Many farmers rely on precipitation to help water their crops as pumping groundwater is the only other option.

“We’re in the irrigation period and it really would be fantastic to get some precipitation out in those areas,” said Cole Perryman of the Oklahoma Water Resources Board.

After three fairly wet years, the drought ranging from “severe” to “exceptional” has descended on the southern Great Plains of Colorado, Kansas, New Mexico, Oklahoma and Texas, according to the U.S. Drought Monitor at the University of Nebraska-Lincoln. The most drought-stricken region remains the southern Plains, southern Rockies and Southwest. The highest drought intensity and exceptional drought, can be found across the Oklahoma Panhandle, north Texas, southwest Kansas, northeastern New Mexico, as well as the four corner states of Utah, Colorado, Arizona and New Mexico. Extreme drought stretches from central Kansas through the southern Rockies and into southern California. The next week has a few chances for showers in Texas and Oklahoma, but most of the southern Rockies and Southwest will remain bone-dry.

Home to one of the nation’s most fertile farming areas—crop production in the Texas region alone generates about $12 billion in economic activity—observers say the drought could punish the agricultural sector, affecting everything from cotton to cattle to farming-equipment sales.

“It’s going to be in the billions in terms of crop loss,” said Darren Hudson, director of the International Center for Agricultural Competitiveness at Texas Tech University in Lubbock.

A semiarid region, the southern Plains region has seen a variety of drought conditions for much of the last decade, but the severity of this latest dry spell has many concerned. For farmers in the region, the sudden falloff in precipitation is a reminder of the devastating drought of 2011 when Texas agriculture lost $7.6 billion, the worst losses on record in the state, according to the Wall Street Journal.

Already, the Plains drought has dealt a blow to two other major pillars of the region’s ag economy: winter wheat and cattle. An estimated 60% of the 4.7 million acres of winter wheat in Texas as of May 7 was considered “poor to very poor,” according to Texas Wheat Producers, a trade group, meaning the crops are likely unusable. Kansas, the top winter-wheat-producing state, is expected to have its smallest crop in almost 30 years.

So, what are the implications for freight if the agricultural market is severely depressed in the region? For starters, it can drive up the cost of freight to surrounding areas that still need their standard consumption. The inbound market could tighten with less options of freight to bring in—and the outbound market suffers as well with longer stretches on the backhaul before connecting to more freight. Drivers coming inbound to Houston at this time of year, for instance, will often deadhead it to the valley to the south where they’d pick up their melons and citrus and other agricultural products.

Jared Flinn, operating partner at Bulkloads.com tells FreightWaves, "Lots of inbound trucks for the feed and wheat markets will go up. Basically, any disruption in a region sends ripples across the chain." For truckers, it's all about efficiency for their miles.

As FreightWaves reported last month, grain was already in trouble. "Grain has already been in low demand," says Flinn. "There's a lot of grain out there, but there hasn’t been the place for it. A little bit a result of the tariffs, but also just uncertainty. It may change the logistics or flow a little bit, but one way or another someone’s going need.

Soon enough, there may be a lot less grain.

Meanwhile, in order for many truckers who have been hauling grains for years to stay in the game, they've moved out to other segments. “A lot of independent, small owner-operator guys that make up the majority of the industry were affected by the ELD mandate. And for the guys on the verge of retirement, this was the last straw to exit the market,” Flinn says. “The ELD and the rates have been a bad combination for them to even stay in trucking.”

First it was hurricanes, now it's widespread drought. The region will no doubt adapt, but constraint will tighten further, many farmers will tighten their belts, and the short-term future of grain in the U.S. looks bleak.

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