Industry Trend Analysis - Hurricane Harvey Impact Fairly Limited For Now - OCT 2017

BMI View: US cotton and livestock markets will be the most affected by the recent landfall of Hurricane Harvey in Texas ; although , in both cases , we expect the impact to be relatively minimal. Texas has both a large cotton crop and cattle herd, but cotton is planted mainly inland and pre-hurricane measures were taken to protect cattle loss.

Since making landfall in late-August, Hurricane Harvey has dumped up to 50 inches of rain in the south Texas area, resulting in what is being called unprecedented flooding, leaving hundreds of thousands displaced and 9mn people under flash flood warnings. Texas is one of the US' largest states and is especially prominent in commodities, as a leading agricultural and energy refining state. Indeed, the hurricane has resulted in the closure - or partial closure - of nearly 25% of the US' refining capacity. This widespread closure has resulted in a rising spread between gasoline prices, which are spiking due to lack of refining capacity, and benchmark WTI prices, which are flagging due to a domestic glut.

Within agriculture, Texas is a prominent cattle, cotton, grains, and sugar producer. We see downside risks to our US cotton and beef production forecasts. Texas leads the country in cattle and cotton production, comprising 14% of the US cattle herd and 25% of the country's cotton crop. A third of the largest cattle feedlots in the US are located in Texas. Within Texas, over a quarter of the state's cattle herd is located within the 54 counties that have been labelled disaster areas by Governor Greg Abbott, presenting considerable upside risks to feeder cattle prices over the coming weeks should a significant number of cattle perish in the ensuing floods.

Texas A Major Player
United States - Beef Cattle Inventory By State (%)
Sources: BMI, USDA, NASS

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