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Shut down of port worst scenario for Midwestern farmers
By TIM ALEXANDER
Illinois Correspondent

URBANA, Ill. — While the human toll of Hurricane Katrina is still being assessed, so to are the economic ramifications for the agriculture industry due to the closing of the Port of New Orleans and other key ports of entry from the Mississippi and Illinois rivers to the Gulf of Mexico.

Those ramifications could be very significant for Midwest producers who rely on the waterways to transport their harvests to market, agriculture leaders and river experts agree.

“(The Port of New Orleans) is a major port for U.S. corn and soybean exports and the impact, particularly for corn, could be significant,” said Darrel Good, a University of Illinois Extension marketing specialist.

New Orleans’ and other gulf ports are especially vital to U.S. agricultural producers who ship grain and soybeans to Mexico, the Caribbean, and South America. According to the U.S. Army Corps of Engineers, 59 percent of the 29.7 million metric tons of U.S. raw grain exports so far this year traveled through gulf ports.

Ranked by cargo volume, the Port of New Orleans, which has been left damaged and without power by last week’s hurricane, is the country’s fifth-largest port. The nearby Port of Louisiana ranks first, with the three other Louisiana ports ranked in the top 12, according to the Corps of Engineers.

According to published reports, all gulf ports have ceased operations since the hurricane, leaving producers and others who rely on the gulf’s ports wondering how they will be able to export their harvests this year.

Good said that for corn farmers, the impact is immediate and dramatic.

“Corn is the real story in terms of agricultural impact,” Good said. “Upwards of 35 million bushels of corn are exported from the U.S. each week, most going out of the gulf. That trade has come to a screeching halt. And this will have reverberations all the way up the river system.”

Farmers from north-central Illi-nois and other drought-stricken areas of the Midwest are facing a double-whammy, Good said.

‘The areas in (Illinois) that were hardest hit by the drought - from Peoria on north - are the same ones that rely heavily upon the Illinois and Mississippi rivers to sell their corn. Their corn was damaged by the drought and now their harvest faces low prices because the shipping system is disrupted,” Good explained. “Some are saying it could be a month before the (Port of New Orleans) is functioning. It seems to me that if they could get it going that soon, they’d be doing pretty well.”

According to Paul Rohde, a spokesman for river user’s organization MARC 2000 in St. Louis, if the port were to be closed until late November, grain markets would be severely impacted.

“We’re still trying to get info on how the Port of New Orleans was affected,” Rohde told Farm World late last week. “Phone lines are making simple communication a real challenge. It may be several (more) days before we have a handle on the true impact this has had to navigation, agriculture, and the other elements that involve river transport on the Mississippi.”

Rohde said the effects of the hurricane had already affected basis as early as a couple of days after the storm’s passing.

“Our spot bid on Friday, Aug. 26, was -28 cents, already weak,” reported John Finley, marketing manager at Pattison Bros., a Mississippi river barge terminal headquartered in Fayette, Iowa, and a MARC 2000 partner. “Two business days later, both bids were -50 cents and even spring bids were widening out. Basically, I’d say there’s a big risk margin built in because of the uncertainty of how long the river system will be disrupted.”

Rohde said Pattison Bros. recommends that for those who can’t store their harvests, one alternative is to sell for fall delivery and spend 10 cents to 15 cents for a May or July call option.

“This does not protect market carry, but does keep you in the market for price improvement,” Pattison’s Matt Nosbich noted.

A posting on the Port of New Orleans’ website said the port began to lock down its bridges across the Inner Harbor Navigational Canal the morning of Sunday, August 28. At the earliest possible time after the hurricane, operations would be restored at the canal, according to the website, which had not been updated as of Friday morning. Hurricane Katrina has already played havoc with the cash grain market, according to a cashgrainbids.com report.

On Monday, Aug. 29, many key markets took a 7 to 10 cent a bushel dip in basis.

“With flows down the river likely stymied for the coming days and corn bins already full, corn basis may be slow to recover from this recent slide,” said John Hawkins, news service director for the Illinois Farm Bureau.

Rick Hodel, vice-president and general manager for the Peoria Barge terminal on the Illinois River, said that the river, which feeds from the Mississippi, will likely see a backup of barge traffic in coming days.

“I’m sure it’s going to happen. We anticipate there will be delays,” Hodel said. “It will probably be a week or so before they have a good handle on what’s going on, even if the terminals were not damaged.”

Brad Harding, a central Illinois agronomist and WMBD-TV (Peoria) ag correspondent, said that three-fourths of grain exports from 17 Midwestern states use the New Orleans port to export their harvests.

“Energy, cotton, grain and livestock will all be impacted,” Harding reported. “Farmers will now have to brace for crippling fuel prices during harvest this year, as well.”

Actual damage to crops in southern states is still being calculated, with Florida already reporting that crop damage from Katrina is expected to eclipse $427 million.

Meanwhile, the USDA said its Food and Nutrition Service would provide meals and other commodities, such as infant formula, distilled water, and emergency food stamps to survivors of the hurricane.

Published in the September 7, 2005 issue of Farm World.

10/26/2005