b'8American Journal of Transportation ajot.comCan the US Midwest ag business re-emerge from the rubble of the economic Derecho?By George Lauriat, AJOTIn early August, a derechoa storm withlowwiththeexceptionofproteins,like winds upwards to a 100-miles per hourcutbeef, pork and poultry. Two factors have been a250-milelongswathwreakingdestructioninstrumental in undermining agricultural com-throughMidweststates.Milesofflattenedmodity prices, the drop in corn-based ethanol crops,crushedgrainbins,downedpowerdemand for gasoline and exports to China. lines,damagedresidencesandtoppledtreesBack in March, Secretary of Agriculture were left in the derechos wake.Sonny Perdue in testimony before the House In some ways, the storm was analogousAgricultureCommitteesaidImtelling to whats happened to the Midwest economyfarmers to do what theyve always done and over the last couple of yearsbuffeted by theplant for the market. Im telling farmers not whirl winds of the ongoing global tariff wars,to anticipate one. Dont expect one. We know the impacts of the Covid-19 pandemic and bat- there will be some weaning pressure here as tered by crop killing bad weather, economicpeoplehavebecomecomfortablewiththat. growthhasbeenflattenedbythisrelentlessOur goal is not to continue a Market Facilita-Derecho of misfortune.tion Program [MFP]. If we see trade increase and prices dont go up, thats a market signal f armersa LmanaC to farmers who are producing too much.OneprismthroughwhichtoviewhowHowever,withtheelectioncominginThe Kroger Co.s shipment of three 63-cent cans of cornone dentedis opened in North Georgia after a 2,000-mile-plus transcontinental trek. things are going in the Midwest is the FederalNovember and the ongoing economic crisis in(Photo by Paul Scott Abbott, AJOT)ReserveBankofChicagosmonthly AgLet- the heartland, more farm relief money is going ter, which covers the Seventh Federal Districtto be moving to the Midwestthe question isKrogers transcontinental composedofIllinois,Indiana,Iowa,Michi- only how much and to which programs. ganandWisconsin.ThenewsletterlargelyPerdue recently said the Department ofship-to-home turns out to covers the lending health of the region, whichAgriculture would be able to utilize an addi-includes subjects like agricultural land valuestional$14billionthatCongressapproved and crop pricinga sort of Farmers Almanacfor the Commodity Credit Corporation. Andbe no simple can of cornof numbers on agricultural economic perfor- the USDA is saying CFAP 2in which the mance and local conditions. USDA retained a 20% balance to ensure ade- By Paul Scott Abbott, AJOTIn the August newsletter, noted that creditquate fundingis expected to be applied in conditions had weakened with the onslaughtearly September.For The Kroger Co., theing its ship-to-home offerings.of adverse conditions compared to the sameAt this writing [Sept. 1st] Congress went tolargestU.S.groceryretailer,Accordingtoan Aug.11 period last yearwhich itself was tough forrecess without inking a new Covid-19 relief pack- cateringtotheboomingannouncement, the Kroger Ship theregion:Giventhewidespreadadverseagethe House version of the bill (HEROES)ship-to-homebusinessintheprogram,launchedinAugust effectsofthepandemicinCOVID-19-impacted market- 2018, is initially making more thesecondquarterof2020,2 ChicagoFedRelativeMidwestEconomyIndex placeisobviouslynotquitethan50,000additionalitems unsurprisinglyagriculturalas simple as a can of corn fromthird-partysellersavail-credit conditions for the Dis- 1 the slang baseball term for anable to homes under a partner-trict weakened compared witheasy-to-catch fly ball. ship with Mirakl, a Paris-based a year earlier. For the second0 At a time when retailerse-commerce software firm.quarterof2020,repayment-1 are going to unusual lengthsTo better serve our cus-IndexStandardDeviationrates for non-real-estate farmto be consumers top choicetomers,werecontinuing loans were again lower than-2 for home deliveries, Krogerstoinvestintechnologythat in the same quarter of the pre- recentshipmentofthreeenables us to expand our dig-vious year. The portion of the-3 63-cent cans of corn involveditalservicestodeliverany-Districtsagriculturalloan-4 a transcontinental journey ofthing,anytime,anywhere, portfolioreportedashavingmore than 2,000 miles, withJodyKalmbach,Krogers majororsevererepay- -5 oneofthecansarrivingingroup vice president of prod-mentproblems(8.3%)haddented condition. uctexperience,saidinthat not been higher in the second-6 1980 1985 1990 1995 2000 2005 2010 2015 2020 Thecansofcorn,soldannouncement.quarter of a year since 1988. Source:FederalReserveBankofChicago fred.stlouisfed.org foratotalof$1.89,wereIn its fiscal quarter ended Despite the obvious finan- shipped via FedEx from Hen- May 23, Kroger reported a 92 cial distress for the regions farmers, the AgLet- calls for around $33 billion for agriculture whilederson, Nevada, to a home inpercent increase in digital sales terreportedasurprisingstrengthening(butthe Senates version (HEALS Act) would approveCleveland, Georgia, over thecompared with a year earlier.modest) of farmland valuesup 1% over the$20 billion. Most beltway pundits think the dealcourse of four July days, byThe carton with the corn same period in 2019in the District. Accord- will fall someplace in the middle. way of a routing that, basedcans was one of three boxes to ing to the Chicago Fed, This uptick broke aChina is a big factor in how fast and fromupononlinetrackingdata,arrive via FedEx at the rural streak of year-over-year declines in real farm- what sectors the Midwest recovers. The Trumpappeared to involve transportNorthGeorgiahometoful-land values that had extended back six years. administration deal with China calls for $36.5on one or more trains, includ- fillanordertotaling$37.14 Andthereisacaveattothe[relative]billion in agricultural and seafood purchasesing via FedEx partner BNSFincluding tax, with no charge strengthening of farmland values. The Federalin the first year. Around six months into theRailwayCo.Becausethefor shipping under a special government has buoyed the regions agricul- pact,Chinahadpurchasedonlyabout25%outer packaging seemed intactKroger promotion. Two other tural bottom line with the Market Facilitationof the tally but in recent months, exports ofupon delivery, it is likely theboxes, apparently transported Program(MFP)designedtohelpdealwithcorn, soybeans (as of August 6th 16.9 millioncan was dented before it leftby truck along Interstate 85, lost farm income from tariff induced cuts intons had been sold) and other ag products hasKrogersdistributioncentermade a 300-mile trip from a exports and the Coronavirus Food Assistanceaccelerated.HowmuchChinapurchasesinjustsouthofLasVegas.KrogerwarehouseinNorth Program(CFAP). AccordingtotheChicagoPhase 1 and whether Phase 2 is ever imple- WecantbesureaboutallCarolina.Oneofthosetwo Fed, by the end of June, the CFAP had alreadymented remains to be seen. this, though, because repeatedother boxes contained just a dispersednearly$1.3billiontofarmopera- mediaqueriestomorethansingle itema 99-cent pack-tions in the five states of the District or roughlyw iderC onCerns adozenKrogerexecutives,age of coffee filters weighing 27% of the almost $5 billion dispersed by theAmongthemanyproblemsfacingMid- includingKristalHoward,a fraction of an ounce.Federal government. Overall, the MFPa pro- westfarmersisthepossibledroppingofdirector of corporate commu- In How to Speak Base-gram largely created by Secretary of Agricul- supports for corn crops to be used in the pro- nications and media relations,ball, by James Charlton and ture Sonny Perdue to circumvent the need forduction of ethanol. Perdue remarked that thereand Robert Clark, senior viceSally Cook, a can of corn is Congress to approve the budgethas alreadysimply might not be enough Federal subsidypresidentofsupplychain,defined as: An easy fly ball committed $22 billion to farmers. While themoney to continue supporting the program butmanufacturing and sourcing,to catch. Easier to catch than MFP and the CFAP have certainly contributedthere are deeper concerns.havegoneignoreddespitea sack of potatoes.to economic stability in the region, the ques- In June, the University of Missouris Foodread receipts for emails. Evenwithitsexpanded tion remains how long will the programs propandAgriculturalPolicyResearchInsti- What is clear is that Cin- ship-to-home offerings, it doesnt up the economy in the Midwest?tute (FAPRI) released their Baseline Update forcinnati-based KrogerwhichlooklikeKrogerofferssuch U.S AgriculturalMarketswhichoutlinedtheranksbehindonlyWalmartdelivery for sacks of potatoes, m idwestr eLief ? situation, Widespread shelter-at-home ordersamongU.S.generalretailersatleastnotyet,regardlessof Even with the derecho damage to crops,as a result of COVID-19 sharply reduced motorand is the fifth-largest retailer inpoint of origin and perhaps dis-agricultural commodity prices have remained(DERECHOcontinued on page 26) the worldis actively expand- tant destination.'