Katrina leaves looming shipping crisis in her wake
caused by Hurricane Katrina's destruction of waterways and
transport infrastructure could cost food producers billions.
A preliminary commodity-by-commodity analysis for sugar cane, soybeans and corn in Mississippi and Louisiana, which suffered the primary impact of the storm, indicates that while considerable harm was done to crops, the impact on prices will likely be negligible in light of strong harvests elsewhere in the country.
But this depends on how quickly the freight transport infrastructure in and around the Gulf of Mexico is back to operating at full capacity. Despite the minor effect on crop prices nationwide, Katrina's impact is already being felt in the form of a severely crippled river shipping and Gulf port system and spiking fuel costs.
"Unfortunately, crop, livestock and poultry losses in the Delta may be the tip of the iceberg," said the American Farm Bureau (AFB)'s senior economist Terry Francl.
Just over 60 percent of corn and soybean exports originate from the New Orleans area. With barges loaded with farm goods stranded on the Mississippi River and no access for ocean-going vessels, grain elevators have reduced the prices they are paying growers and Francl cautioned that US grain and oilseed producers may see the cash prices bid for exported crops decline another 5- to 10-cents per bushel while the Gulf ports are effectively shutdown for repair and restoration.
"Furthermore, there is mounting concern that the shutdown will compel international buyers to look to other sources, such as China for corn, or South America for soybeans," he said.
Certainly, grain processors including Cargill are concerned that with the grain harvest season less than a month away, shipping will remain constrained during the busiest and most important time of the year. This could translate to a half-billion dollar export loss for US ingredient producers.
Also likely to further undercut growers' bottom lines are rising energy prices. Crude oil derived from the Gulf accounts for 30 percent of domestic production, while the natural gas produced in the region accounts for 21 percent.
About 95 percent of oil output was disrupted during the hurricane and in its aftermath. The ensuing 30- to 40-cent per gallon jump in gasoline and diesel prices presents another significant challenge to farmers nationwide preparing for harvest and could come with a half-billion dollar price tag, predicted Francl.
Katrina has not only destroyed important infrastructure - it has also devastated local producers. The region's dairy industry has been badly hurt, although the full extent isn't yet known.
"Most producers had to dump both Monday's and Tuesday's milk production because they simply had nowhere to send it, and if they had a plant to send it to, they could not get the transportation worked out,"said Dr Kurt Guidry, LSU AgCenter economist.
Citrus production, which was worth around $6.3 million in 2004, has also been devastated, and early estimates suggest that between 20 and 30 percent of Louisiana's oyster boats have been lost. The region produces 10 percent of the shrimp consumed in the United States and 40 percent of the oysters.
And with the United States already facing a tight sugar supply - and subsequently increasing the allotments for imported sugar - the price of sugar from sugar cane is also likely to be significantly impacted by Katrina.
