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Shutdown of Ports Hurts Exports, Grain Prices

Posted on: Friday, 2 September 2005, 18:00 CDT

Sep. 2--Damage from Hurricane Katrina has brought grain shipments to a standstill in ports around New Orleans and the Gulf of Mexico.

The shutdown of ports has already resulted in a drop in the prices farmers get for wheat, corn and soybeans, industry observers said Thursday.

"Sixty-two percent of the grain (farmers) export goes out of ports that were in the areas damaged by the hurricane," said Kelly Smith, director of marketing and commodities for the Missouri Farm Bureau in Jefferson City. "That's of major concern right now."

Although wheat, corn and soybean futures made a technical recovery in late trading Thursday, those prices have been down much of this week because of the lack of shipping movement in and out of the Gulf of Mexico. Cash prices for grains also are down, and additional losses could come depending on how long river and port navigation is closed, Smith and others said.

While the extent of the destruction resulting from Hurricane Katrina will probably take weeks to assess, conservative estimates predict a $1 billion price on the damage done directly to crops and livestock, according to Terry Francl, senior economist with the American Farm Bureau Federation.

Expect an additional $1 billion in indirect costs to the farm economy as a result of the waterway shipping crisis and soaring fuel prices, the federation said.

Farmers and grain elevator operators need to get storage space cleaned out to make room for corn and soybeans from the coming harvest, Francl said.

Gulf ports remained closed for a fifth day, although a short stretch of the Mississippi River near the gulf was reopened Wednesday to barges and tugboats, according to the Coast Guard.

But Smith noted that while part of the river had reopened, ships for transporting grains and other goods were not yet allowed in the ports. Many barges also remain stranded on the river.

Melvin Brees, crop marketing specialist at the University of Missouri-Columbia's Food and Agricultural Policy Research Institute, said that while lower grain prices were being felt throughout the Midwest, it was particularly so around Mississippi River loading points.

"It's having an impact, but the most impact is showing on cash demand," he said. "Cash demand has been reduced because you can't export, and that reduces the cash prices."

Brees said most export facilities were not reporting major structural damage.

The biggest problem was getting power restored and getting the channel cleaned.

In grain trading Thursday, wheat futures finished higher in a correction to recent declines. Some support also came from fresh export business after Egypt purchased 120,000 metric tons of U.S. soft white wheat. In its weekly report Thursday, the U.S. Department of Agriculture said exports for the week ending Aug. 25 were 396,900 metric tons, below trade expectations for 400,000 to 550,000 metric tons.

Corn futures finished higher, but the gains were limited by concern about the suspension of exports at the Gulf of Mexico. For the week ending Aug. 25, net export sales of U.S. corn were 903,500 metric tons, within trade expectations for 800,000 to 1.1 million metric tons.

Soybean futures finished higher in a technical rebound after Wednesday's sharp declines. For the week ending Aug. 25, net export sales of U.S. soybeans were 625,400 metric tons, near the low end of trade expectations for 600,000 to 900,000 metric tons.

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Source: The Kansas City Star (Kansas City, Missouri)

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