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Sunday December 10, 2017

When Ophelia grew to official hurricane status the second week of October, it tied a record set more than a century ago for the most number of such storms in the Atlantic for a season. Orphelia adds insult to injury for a hurricane season that's seen the first Category 4 hurricane to hit the Texas coast—Harvey—in more than a half century, dumping anywhere from 10- to 40-inch rainfall totals along the Texas and southwestern Louisiana Gulf coasts. Meanwhile, Hurricane Irma battered Florida with similar winds and rain.

Which commodities stand to suffer most with this season's weather? The industry will be a long time in counting the final tab, but here's what we know to date:

Citrus. In Florida, Hurricane Irma in September hit a direct blow on citrus groves, removing half the developing oranges from their trees across the state, according to the University of Florida Institute of Food and Agricultural Sciences. On the upside, however, USDA estimates Brazil’s total output of orange juice will rise by more than 50 percent this year from last year, and as a result, its exports will also rise by nearly 30 percent. Couple that supply increase with an overall demand decline for orange juice—Americans today drink just half the orange juice they did 10 years ago—and supplies should remain sufficient.

Corn, soybeans and wheat. The U.S. food-system's three staples are actually in better shape this year, hurricanes notwithstanding, according to USDA. USDA's current estimate for the fall harvest puts the corn yield at 171.8 bushels per acre, up from last month’s 169.9. Expected record yields in areas outside the major producing states are helping contribute to the size of the overall harvest. USDA meanwhile lowered its expected soybean yield to 49.5, compared to 49.9 last month. However, because the expected number of acres that will be harvested is expected to be higher this fall, USDA believes the total production view for the oilseed will stay steady. Both projected corn and wheat ending stocks are higher than expected. All indicators point to a staple crop market largely shrugging off weather concerns.

Sugar. The 2017 hurricane season has come into play for all sugarcane-producing regions in the United States. Hurricane Harvey’s storm path took it dangerously close to both Texas and Louisiana sugarcane regions, although it ultimately left sugarcane production in Texas relatively unaffected by its wind and rain. Sugar production in Texas in 2017/18 is projected to be 160,000 short tons, raw value, a 10,000-STRV increase from the August projection, as USDA raised its prediction of sugarcane yields in the region from 34.0 to 39.5 tons per acre. Hurricane Harvey produced additional precipitation in Louisiana in an already-wet growing season, but ultimately, the storm’s impact on the state’s sugar production for 2017/18 is expected to be minimal; similar to 2016/17, when the State also experienced extreme precipitation in August but was still able to harvest and process a successful crop.

USDA's September World Agricultural Supply and Demand Estimates lowered projected domestic sugar production in 2017/18 by 41,000 short tons, raw value, from the previous month’s report. Hurricane Irma made landfall in Florida in early-September, but the impact on Florida’s sugar production for 2017/18 can't yet be foretold. Estimated imports from Mexico in 2016/17 are lowered, while projected imports are raised in 2017/18 due to an increase in Mexico’s available supplies. The hurricanes are expected to impact sugar refineries’ operations and supply chains in the Southeast. As a result, estimated U.S. domestic deliveries are reduced 100,000 STRV for 2016/17. Projected deliveries for 2017/18 are raised 100,000 STRV, however, as the interruptions are expected to be resolved by early 2017/18.

Rice. USDA reports that although parts of the Rice Belt endured massive flooding in late August from Harvey, most of the rice crop had already been harvested by the Aug. 26 landfall and will therefore be unaffected. Any impact on the "ratoon" crop—the second rice harvest that regrows from the previously harvested crop, which is not typically harvested until October and early November—is unknown. Southwest Louisiana received heavy rains from Harvey as well, with the bulk of the crop already harvested. Many growers in Southwest Louisiana also harvest a ratoon crop later in the fall.

The overall U.S. rice crop for this year had already declined 702,000 acres from 2016/17, with area smaller in all six major rice-growing states. USDA had lowered its rice crop forecast by 670 million pounds to just under 18 billion pounds in September, 20 percent below a year earlier, making the overall U.S. supply at an estimated 25 billion pounds. USDA also lowered its predictions for total domestic and residual use by 250 million pounds, and exports by 300 million pounds. These supply and use revisions resulted in a 110-million pound drop in ending stocks forecast, a 37 percent decline from last year. Worldwide, this year's production forecasts were raised for India, Burma, and Peru, but lowered for China and Bangladesh, along with the United States. Overall, global production is expected to exceed consumption, leaving global ending stocks projected to increase 3 percent year-to-year to 123.5 million tons, up 0.6 million tons from the previous forecast and the highest since 2001/02.

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