As Hurricane Katrina paralyzed off-shore oil platforms in the Gulf of Mexico and refineries in Louisiana, 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.
â€œOur thoughts are with those in Alabama, Louisiana and Mississippi who were affected by this devastating hurricane,â€ says Rick Tolman, National Corn Growers Association's CEO. â€œRight now, the focus needs to be on the human element and making sure the search and rescue effort continues.â€
Tolman notes 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 says it is really too soon to measure what the outcome will be. â€œRight 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.â€
Each year, 1 billion bushels of grain (or 60% of grain going to export) are exported via the Mississippi River, says Kelley. â€œBetween 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 doesnâ€™t look like ocean freight will ship out of that area for sometime.â€ 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 Mexicoâ€”three-quarters of the totalâ€”had been evacuated, according to the Department of the Interior. Oil production has dropped nearly 92%, or 1.4 million barrels a day. Natural gas production, a component critical to corn growers nationwide, was down 83% which has resulted in a 15% 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.
â€œCorn 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, says Samantha Slater, NCGA director of public policy. â€œThe 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.â€
Trade is another issue that will certainly be affected by this hurricane, says June Silverberg, NCGA director of public policy. â€œNinety percent of corn exports go through the Mississippiâ€“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.â€