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Catastrophic Crop, Cattle Loss From Midwest Floods Will Soon Lead To Severe Supply Disruption

By Daryl Lovell
 
The “bomb cyclone” that hit several Midwestern states triggered devastating flooding in most of Nebraska, leaving behind more than $1 billion worth of flood damage. Floodwaters have begun to recede in Iowa and Nebraska, while residents in northwestern Missouri are still waiting for waters to pull back.
 
Rong Li is an assistant professor of supply chain management at the Martin J. Whitman School of Management at Syracuse University. The supply chain management professor says those impacted should actively be seeking suppliers from alternative sources.
 
Li says:
 
“Nebraska is the third-largest producer of corn in the country, second in ethanol production and distillers’ grains, second in cow-calf production and first in cattle on feed.
 
“The huge loss of crops and cattle in Nebraska due to the recent flood will soon lead to severe supply disruption to the downstream of the relevant supply chains. They should actively seek suppliers from elsewhere or alternative suppliers.
 
“To hedge against such supply disruption risks in the future, companies should take into consideration disruption likelihood (due to weather, strike, cyberattack, production capacity/inflexibility, etc.) for supplier selection. And this consideration should be given a heavy enough weight as supply disruption happens more and more nowadays. Disruption risk evaluation of current and prospect suppliers should also be constantly updated to help adjust to the fast-changing environment.
 
“As most of the corn in Nebraska is used to produce ethanol, which is a biofuel additive for gasoline, however, the flood may not create much food shortage. That being said, the loss of corn may have contributed to the corn futures price continuous increase in the last three days (to a total of about 2 percent on CME, or Chicago Merchandise Exchange) – the manufacturers and oil processors who use corn as an input may expect to pay a higher cost.
 
“As catastrophic weather such as flooding and drought becomes more of a world-wide issue, the agriculture industry may seek flood and drought-tolerant crops for effective risk management. The good news is that the researchers have found a single gene which controls the leaf surface of the crops, that confers both flood and drought tolerance.”