|While American taxpayers await an accounting on the billions sent to the Gulf Coast to clean up Katrina’s devastation, the USDA already knows the tab for four emergency programs hastily designed “to further reduce stress on the grain transportation system” caused by the storm.
The amount was $22.7 million.
And, according to published data (at www.fsa.usda.gov/DACO/Katrina.htm), USDA also knows where most of the loot went.
A cool $19.7 million of the federal aid, or 87 percent, to assist grain merchandisers and farmers along Katrina-slowed Midwestern waterways slipped into the deep, soft pockets of Cargill, Archer Daniels Midland and Louis Dreyfus, three of the world’s largest grain merchandisers.
The program, announced by USDA Secretary Mike Johanns last Sept. 20, had four components to address the Katrina-crunched grain market. All were tied to slowing or reversing the flow of grain along an already backed-up, drought-pinched Mississippi River system.
The first was a “temporary incentive” - known elsewhere as cash - “to assist immediate movement of some 140 barges of damaged corn out of New Orleans to upriver locations.” Once there, the barges would be unloaded to then “continue up the river to load and begin moving new-crop commodities.”
Under this part of the program, Cargill, the giant multinational that earned $2.1 billion on 2005 sales of $71.1 billion, was paid $7.2 million to move 92 barges back upriver.
Louis Dreyfus, another $20-plus billion-a-year global grain player, received $2.03 million to, as Johanns hopefully noted Sept. 20, “relieve pressure on farmers and related businesses” by moving 28 barges back whence they came.
The second part of the Katrina program, “barge unloading of damaged commodities,” delivered a second helping of cash to Cargill - another $960, 985.92, according to USDA stats.
The emergency plan also included a “freight differential” - again, cash - “to reduce stress on the Central Gulf transportation and handling system... to cover the costs of moving grain to other river transportation modes and handling and locations.”
ADM leaped into that breach and picked up $1.03 million in freight costs to divert shipments to other ports. Dreyfus, which also diverted grain away from New Orleans, collected $436,261.
Part four of the USDA plan sought to keep grain off Midwestern rivers by paying upstream merchandisers, cooperatives and elevators to temporarily store it - mostly on the ground - until the Mississippi system could once again absorb it.
The temporary storage approach, at least theoretically, would also keep local grain prices from collapsing due to the river backlog.
Nineteen grain handlers - ranging from tiny Western Illinois Grain in Colchester, Ill. to massive ADM - bid 32 million bu. of grain into the temporary storage program at a total cost of $7.85 million, or an average 24.5-cents per bu.
The industry’s lions, again, received the lion’s share of the money. ADM pocketed $4.6 million to store 16.4 million bu.; Cargill grabbed $1.3 million on 5.2 million bu.; and the Japanese-owned Consolidated Grain & Barge, now renamed CGB Enterprises, garnered $826,864 to hold on to 3.65 million bu.
That’s not a bad chunk of change for what most were going to have to do anyway.
Given the millions the Grain Gang got from the short-lived program, did any aspect of the Katrina-inspired action actually hit its intended target, farmers who witnessed cash grain prices slump after the hurricane slammed the Gulf?
“The theory was right,” notes Richard Sauder, general manager of Tremont Cooperative Grain, Tremont, Ill., “but it mostly put money in the pockets of big agribusiness.” (Tremont Grain received $25,000 in USDA cash to temporarily store 200,000 bu. of corn under the program.)
“Did it help farmers directly?” Sauder continued. “No. Did it help them indirectly? Well, it could have.”
Then, after a long pause, he added, “You can get a lot of money in Washington by just saying ‘this will help farmers.’”
True, yet it’s very doubtful the program helped farmers.
It is crystal clear, however, USDA’s quickly implemented “help-your-local-transnational-grain-company” program fattened the bottom lines of the Big Boys.
Hey, disaster has always been a good business to be in.
This farm news was published in the August 9, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.