What is in this article?:
- Louisiana's Port Allen grain facility leased by Louis Dreyfus.
- Lease agreement requires massive upgrade of facilities.
- Through-put at facility expected to increase price farmers receive for grain.
Following the release of the LSU AgCenter study, “based on a number of factors, it was decided Dreyfus would be the best operator,” says Strain. At day’s end, “it will mean between $10 million and $30 million annually in farmers’ pockets.”
In late February, the Port Commission unanimously agreed to strike a deal with Dreyfus. The company is expected to take over the facility in mid-June.
In order for Dreyfus’ plan to work, all interviewed say the company must aggressively buy grain.
To reap the benefits of such infrastructure investment and be able to compete in the export market, “I think (Dreyfus) will have to make the investments as quickly as possible,” says Bollich. “You can’t go halfway – you either have efficiencies where needed, or you don’t. If you have efficiency in barge unloading but not in the ship-loading capacity, it doesn’t help you.
“I think Dreyfus has to get the facility up to speed, as soon as possible. And they’ve stated the same. Once that happens, we’ll really have something here.”
Could Dreyfus impact prices farmers get in other states along the Mississippi?
“No question, it will,” says Bollich. “Dreyfus plans to put 5 million metric tons of grain through the port – ballpark, say 200 million bushels. In Louisiana, depending on the acreage mix and yield, we’ll grow 100 million to 110 million bushels of corn and soybeans. So, if we have a big corn crop, Dreyfus could get 1 million tons from Louisiana. But that leaves 4 million metric tons – 150 million bushels -- for Dreyfus to pick up from points north.”
The $10 million to $30 million estimated annual impact from the Dreyfus deal “is for farmers across Louisiana. It wasn’t just for those who deliver to the Port Allen facility,” says Strain. “We also expect to see an increase in price or a lessening of the basis all up and down the river.”
In the LSU AgCenter report “we said based on the market and the basis history, conservatively, if Dreyfus came in not only would they bid up prices in Baton Rouge but every bushel of grain taken that exceeds the recent norm will push everyone’s price on the river up,” says Salassi. “Dreyfus is proposing to run 4 million to 5 million metric tons of grain through the Baton Rouge facility. That could raise the price of corn and soybeans in Louisiana by 10 cents to 30 cents per bushel.”
To handle that much grain, Dreyfus will “have to buy 3 million-plus metric tons that haven’t been bought there before. That’s going to reduce the supply available to the other elevators on the river. In order for these elevators to keep their volume at current levels, they will also have to bid up prices. That should raise everyone’s price – all the way up the river.”
Unlike more well-known grain companies, Dreyfus doesn’t have a network of country elevators or barge facilities.
“They’ll get what they can out of Louisiana,” says Bollich. “Then, they’ll have to deal with private facilities and independent co-ops. As I understand it, this isn’t an altogether new game for Dreyfus. It has been a very successful trader in U.S. markets for decades. They just don’t have the brick and mortar throughout the country. They may be looking for acquisitions. Right now, though, they’ll be looking for grain that isn’t already controlled by the other exporters.”
Regardless, “any way you cut it, this is good for farmers,” says Bollich. “You start off with the same-sized pie – the U.S. crop won’t grow so much just to accommodate Dreyfus. Instead, there’s one more buyer competing for the same pie. Add a competitor to any commodity situation like that and it’s good for the producer.”