Hurricane Katrina Impacts Transportation Costs and Trade for Producers
(8-31-05)
As Hurricane Katrina paralyzed off-shore oil platforms
in the Gulf of Mexico and refineries in Louisiana, the National Corn
Growers Association (NCGA) notes the timing could hardly have been
worse. Record-high oil prices will skyrocket, and Katrina will have
an overall negative impact on grain producers and grain transportation.
“Our thoughts are with those in Alabama, Louisiana
and Mississippi who were affected by this devastating hurricane,”
said Rick Tolman, NCGA’s CEO. “Right now, the focus needs
to be on the human element and making sure the search and rescue effort
continues.”
Tolman noted that once the rescue effort is finished,
that will be the time to assess the damage and the impact on grain
transportation, exports and the oil and gas sector.
Lisa Kelley, NCGA director of public policy said it
is really too soon to measure what the outcome will be. “Right
now, it is too soon to tell what the long-term transportation damage
may be along the Mississippi River and any damage to the New Orleans
ports. Barge traffic, carrying commodities, goods and essential crude
oil, has been halted on the Mississippi.”
Each year, 1 billion bushels of grain (or 60 percent
of grain going to export) are exported via the Mississippi River,
said Kelley. “Between the low water issues facing the Upper
Mississippi and the potential and significant damage to the lower
Mississippi infrastructure and port at New Orleans, it doesn’t
look like ocean freight will ship out of that area for sometime.”
Kelley also mentioned, with the river transportation already stopped
and potential damage done to the infrastructures, farmers and businesses
will now need to rely on rail or truck transportation, which is more
expensive and are already heavily used.
According to news reports, Hurricane Katrina has already
interrupted farm shipments through New Orleans.
Also impacting transportation are the rising and almost
crippling prices of oil and gasoline. Energy production, according
to news sources, is all but paralyzed in one of the nation's main
hubs for oil and gas, shuttering refineries, raking offshore oil platforms,
closing pipelines and raising fears that oil prices could reach debilitating
heights in the coming weeks. Six hundred fifteen of the 819 oil platforms
in the Gulf of Mexico—three-quarters of the total—had
been evacuated, according to the Department of the Interior. Oil production
has dropped nearly 92 percent, or 1.4 million barrels a day. Natural
gas production, a component critical to corn growers nationwide, was
down 83 percent which has resulted in a 15-percent price increase.
However, U.S. Department of Energy Secretary Samuel W. Bodman today
notified the public that the Strategic Petroleum Reserve will be opened
for this emergency.
“Corn growers are certainly going to be affected
drastically with the rising costs of natural gas and diesel. As they
head into harvest, the impact of the devastating effects of this hurricane
will be felt throughout the Corn Belt, said Samantha Slater, NCGA
director of public policy. “The costs of natural gas and gasoline
our farmers have and will face in the coming days will be even higher
than expected and will have lasting impacts on the prices they will
receive at market as well as the impact of limited transportation.”
Trade is another issue that will certainly be affected
by this hurricane, said June Silverberg, NCGA director of public policy.
“Ninety percent of corn exports go through the Mississippi–Gulf
Area. The Port of New Orleans is closed, the electricity in the area
is out and the Corps of Engineers are looking to secure the infrastructures
and facilities as best as possible. No one will really be able to
assess the full damage to commodities industry for sometime.”