Extension News

Katrina Disrupts Grain Markets and Shipments

9/2/2005

AMES, Iowa -- Hurricane Katrina’s attack on the southeastern United States is having an impact on the grain prices and delivery in Iowa, according to Robert Wisner, Iowa State University Extension economist.

New Orleans Grain Facilities
“It may take a week or more to get full assessment of the impact of Katrina on export elevators. One problem is the loss of electric power. Another is great difficulty in getting employees in and out of the area,” said Wisner.

He says railroad shipments into the port facilities are embargoed. As of the afternoon of Aug. 30, some barges were reported missing and many others were tied up near Memphis.

“So far, we have not seen any reports of serious structural damage to elevators in the New Orleans area and there are no reports of sunken barges blocking the channel. Reports on Sept. 2 indicated some elevators in the area are ready to operate as soon as ocean vessels come upstream,” he added.

“Reliable reports indicate the U.S. Army Corps of Engineers has checked the river channel in the New Orleans area and has found no serious damage,” he said

"The eastern Iowa river market bids (as of the morning of Sept. 2) are reflecting basis levels of 34 under for current delivery and 23 under December for October/November delivery,” said Wisner. “Soybeans are showing a 30 under basis for current delivery and 37 under November for October delivery. Both the corn and soybean basis are substantially more depressed than in the last few years. Basis is the difference between local prices and the futures market.”

Recently, New Orleans area ports were handling about 68 percent of the nation’s corn exports, 80 percent of its soybean exports, and 27 percent of the U.S. wheat exports according to Wisner. He says their annual shares of corn and soybean exports would be somewhat less because the upper Mississippi River is closed to navigation during the winter. Other areas that can handle some additional volume include the Houston-Galveston ports, the Pacific Northwest, the south Atlantic and the Great Lakes. Other exports go by rail to Mexico and Canada. 

Wisner said river shipping problems will complicate the job of moving grain out of the western Corn Belt to free up storage space for the upcoming harvest, especially in central and northern Iowa. He added that part but not all of the lost export capacity can be offset by re-routing grain to the Pacific Northwest, Houston, the Great Lakes and Atlantic ports.

Hurricane Katrina and Soybean Crops
Heavy rains from Katrina occurred some distance into Mississippi, eastern Louisiana, and parts of Louisiana, as well as in western Tennessee and Kentucky.

“If half of the unharvested soybean crop in the states of Louisiana, Mississippi, Alabama, Georgia, Florida and South Carolina were lost, U.S. soybean production would be reduced by about 1.4 percent,” said Wisner. He says that is assuming no increase or decrease in the soybean crop north of those states.

“With the usual relationship between changes in supplies and changes in price, that would boost the season average price by about 3.5 percent,” he said.  “That in turn would translate into an expected rise of about 20 cents per bushel in the marketing year average Iowa soybean price. Losing half of the crop in that area would substantially exceed past experiences with this kind of storm.” 

Rain as far north as the eastern Corn Belt may have a slight positive effect on pod filling, but could have caused some damage in parts of Tennessee and Kentucky. These two states in the August crop report were forecast to produce 3.5 percent of U.S. production (98 million bushels).

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Contacts :

Robert Wisner, Economics, (515) 294-6310, rwwisner@iastate.edu

Jean McGuire, Continuing Education and Communication Services, (515) 294-7033, jmcguire@iastate.edu