| September 15, 2005:
As we write this column, the scenes of the crisis in
New Orleans and elsewhere along the Gulf Coast are seared into
our minds. At this distance, it is difficult to imagine the
extent of the damage from Hurricane Katrina and the extent of
the human tragedy that is unfolding hour by hour as people try
to get to a place where they can obtain food, clean water, medical
care, safety, and a good night’s sleep. And those are
only the immediate needs. Current reports suggest that area
residents may not be able to return to their homes for an extended
period of time. The rebuilding of New Orleans and other coastal
cities may take years, not months. The impact of the hurricane
and the subsequent flooding on those directly involved will
last a long time.
While not of the same order of magnitude, Hurricane Katrina
will also have an impact on the U.S. agricultural sector as
well. The impact on producers whose crops were damaged by
the storm is immediate and clearly visible. As yet we have
not seen any estimates of the direct damage to producers along
the storm path, but certainly there will be a number of producers
who lost everything to the storm, not only their crops, but
possibly their homes and other non-land durable assets as
well.
Grain and oilseed farmers, particularly those in the Midwest
whose crops are shipped by barge down the Mississippi and
out through the port facilities in New Orleans, may see the
basis widen even further and prices fall as elevators are
unable to clear last year’s grain out in anticipation
of the crop that is nearly ready to be harvested. Typically,
two billion bushels a year move through the port at New Orleans.
We have seen reports that barges that began their journey
well before the storm hit are now idled with no place to go.
Even if the port facilities reopen within a month, barge traffic
on the upper Mississippi may not be back to normal before
barge traffic stops for the winter. All of this could affect
marketing opportunities for the major grains and seeds.
Undoubtedly, some grain will be rerouted through Pacific
Northwest and Texas ports, but the cost and availability of
rail and truck transport will become a major factor in the
price that farmers will get for their commodities. Given the
usual Fall bottlenecks that crop up with rail transportation,
there is some question of how much grain can be shunted by
rail to other ports.
Adding Gulf production to imports that come through Gulf
ports, a significant portion of the U.S. petroleum supply
has been affected by the storm triggering fuel price increases
in some areas by as much as 80 cents a gallon. The cost of
fertilizer and other agricultural chemicals will also be affected.
With Fall harvest getting ready to begin in some parts of
the country, higher fuel costs could have a serious impact
on farm income as farmers are unable to pass the higher costs
along in the form of a fuel surcharge. These higher costs
also drive up the cost of preparing seed beds for next year’s
crops.
As we contemplate the impact of Hurricane Katrina, we are
reminded of the words Roman orator Cicero uttered nearly 2,000
years ago, “Indeed farming is throughout a thing whose
profits depend . . . on those most uncertain things, wind
and weather.”
Daryll E. Ray holds the Blasingame Chair of Excellence in
Agricultural Policy, Institute of Agriculture, University of
Tennessee, and is the Director of UT's Agricultural Policy Analysis
Center (APAC). (865) 974-7407; Fax: (865) 974-7298; dray@utk.edu;
http://www.agpolicy.org.
Daryll Ray's column is written with the research and assistance
of Harwood D. Schaffer, Research Associate with APAC. |
