• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Farm Economy Recovers From Katrina

Posted on: Thursday, 8 September 2005, 21:00 CDT

Sep. 9--The U.S. farm economy already is recovering from the Hurricane Katrina disaster, and early concerns about a major disruption of the fall harvest appear to be overblown.

Although barges remain backed up on the Mississippi River, substantial progress is being reported in opening shipping passages. Key export customers such as Japan and Korea have continued buying U.S. corn and soybeans. And while prices have fallen for the crops that farmers are selling on the spot market, the hurricane factor is starting to diminish, research analysts say.

Apart from higher fuel costs that affect nearly all businesses, the hurricane's impact on the farm economy will be little more than a short-term hiccup, predicted analyst Dan Basse, of Chicago's AgResource.

"The effect is limited to a couple of weeks," Basse said. "By harvest time, we will be pretty much back to normal."

Agriculture benefited because the hurricane struck at the slowest period for Midwest row-crop production.

Much of the previous year's crop already had moved to export markets or processors, and harvest of the new crop remained weeks away, noted Richard Feltes, vice president and director of commodity research at Refco Inc. From the standpoint of Midwest farmers, he said, "It couldn't have happened at a better time."

The prospect of a relatively small hurricane impact on the U.S. farm sector goes against the statements of some agriculture lobbying organizations that have projected enormous damage. Terry Francl, senior economist at the American Farm Bureau in Washington, D.C., has pegged the hurricane-related losses at $2 billion. "The impact is not inconsequential on agriculture," Francl said Thursday.

Other experts consider that estimate exaggerated, however. "We believe at this point it's overstated," said Joe Victor of Allendale Inc. in McHenry, Ill. "Maybe close to $500 million. Certainly less than a billion."

Alarm over the storm's potential cost to the farm economy has subsided across the heartland in recent days, he added. "We really don't see it as being a huge economic loss for agriculture."

Meantime, Congress has moved to ensure that any losses borne by farmers will be reimbursed by the federal government.

Sen. Saxby Chambliss, a Georgia Republican who heads the Senate Agriculture Committee, said Thursday that he expects disaster aid for farmers to be included in Katrina-related spending bills.

Chambliss also said that because of the hurricane, Congress will delay "for some period of time" taking action on $3 billion in agriculture-related cuts ordered this year to reduce the federal budget deficit.

Brad Glenn, who farms 1,200 acres in Stanford, Ill., and also operates a soybean-growing venture in Brazil, said he expects little lasting impact from Katrina on farm exports, but he's bracing for higher fuel costs.

During harvest in the coming weeks, he will be using a lot of natural gas to dry corn, as well as diesel for his combines, tractors and trucks. "That may be the worst impact of the hurricane," he said.

Indeed, Francl attributes $500 million of the Farm Bureau's $2 billion damage estimate to higher fuel costs, including the impact on prices of fertilizer that is derived from natural gas.

Glenn also noted that spot commodity prices have fallen sharply since the hurricane, in part because grain elevators uncertain of the storm's impact pulled back from the market. Federal farm subsidy payments known as "LDPs" will help compensate for that drop in price, analysts say.

Naturally, for farmers in the immediate path of the hurricane, the impact was much more severe than for those far away. Cotton production in the area hit by Katrina may be reduced by 250,000 bales, and sugar cane by two million tons, Francl estimated.

Mississippi and Louisiana are relatively small producers of corn and soybeans, however. And because the hurricane struck before large reserves of those crops had been moved down river to storage points in the path of the storm, the nation avoided the loss of any large inventories, analysts said.

Grain companies such as Cargill Inc. are working "day and night" to get their product moving through the Gulf, said Cargill spokesman David Feider. "We're hopeful that the Mississippi will be fully re-opened to deep-water traffic soon but we can't say how soon that will be," Feider said. "Our reserve operation is up and running."

By Greg Burns and Susan Diesenhouse.

-----

To see more of the Chicago Tribune, or to subscribe to the newspaper, go to http://www.chicagotribune.com.

Copyright (c) 2005, Chicago Tribune

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

Source: Chicago Tribune

More News in this Category