What is in this article?:
- The economic impacts associated with natural disasters have been estimated at nearly $5 billion to the Louisiana’s agriculture, aquaculture, and fisheries industries.
Issues and lessons learned
While conducting damage assessments can be viewed as an inexact science, years of conducting assessments in Louisiana have provided several lessons which might be applied in other states. First and foremost, a strategic plan for conducting and implementing the assessment is critical to guard against potential biases as well as the temptation to overestimate damages. Also, a plan is critical to be able to address in as accurate manner as possible policy makers, industry leaders, and others with a vested interest in the assessment. Since moving toward a standardized, strategic approach after the 2005 hurricanes, the ability to quickly respond to Louisiana agricultural damage assessment requests has improved as has the level of detail and the number of critical issues that are able to be addressed. The strategic survey approach has accomplished this by creating an environment in which all personnel involved have a clearer understanding of why and how the assessment will be conducted.
Every attempt is made to balance accuracy with timeliness. Credibility of the disaster estimates is improved by limiting initial assessments to major commodities directly impacted and by supplementing assessments with published data from respected sources. Follow-up can be done at a later time to conduct a more detailed, comprehensive assessment of the impacts of a natural disaster. However, in the future proposals for reducing data collected and the number of reports provided by the USDA and by state agencies may make use of published data more limited.
Another lesson learned is that the timing of the natural disaster will likely impact the accuracy of assessments. If a natural disaster event is experienced during the early part of the growing season, the exact nature of the impact on yield and quality will not likely be known for several weeks or months until harvest is completed. As a result, initial estimates need to err on the conservative side. Impacts will likely look worst shortly after an event. Taking an aggressive stance in estimating damage at that time, particularly when harvest is still several weeks away can lead to over estimation. In addition, crops are remarkably resilient and often can and will recover considerably following a natural disaster particularly if ideal weather conditions follow the event.
Impacts on commodities from natural disaster can vary significantly from disaster to disaster and within a disaster event. For some commodities, the impact may be limited to yield losses while others may have experienced yield losses in addition to quality losses and increased production costs. Lumping all of the impacts into one single damage estimate may miss the fact that a commodity was faced with multiple issues and impacts. Where possible, assessments conducted by the LSU AgCenter are categorized by major impacts on specific commodities such as yield reduction, quality losses and increased production costs.
The same shortcoming of lumping different types of impacts into a single damage estimate can be found by combining both short-term and longer-term impacts. Potential multi-year impacts that seem evident during the current production year can change drastically in a few months as weather conditions change. For example, during the 2005 hurricanes one of the multiyear impacts expected was a reduction in yields on acreage that had been impacted by storm surge. However, the full nature of that impact depended on weather conditions in the subsequent year. A year with average to above average rainfall would likely mitigate the impacts of salt levels deposited by the storm surge. Including estimates in the assessment for the 2005 hurricanes on the potential of storm surge on subsequent production would have brought in an additional level of error to the assessment. To prevent this type of error, assessments by the LSU AgCenter limit estimates of economic damages to current year disasters.
Finally, as noted in the discussion of valuing the sale of breeding stock and its replacement cost, consideration is given to the values of stock and flows for capital assets. Sales of capital assets such as breeding stock will result in higher farm incomes in the year of a natural disaster, but farm incomes will decline in subsequent years unless that stock asset is replaced. Estimates attempt to account for the increased cost incurred by agricultural producers to replace capital assets where appropriate. While producers have an incentive to replace capital assets and restore production as quickly as possible following a disaster, each disaster is different in nature. As a result, it can be difficult to accurately determine the true length of the disaster’s impact and how long it will take an operation to return to normal.
For More Information
Fannin, J.M., and Guidry, K.M. (2010). Developing economic assessments in response to natural disasters: A strategic plan for executing extension’s mission. Journal of Extension,48(3), 1 – 7. Available online: http://www.joe.org/joe/2010june/tt1.php
Guidry, K.M. (2005). Assessment of damage to Louisiana agriculture, forestry, and fisheries sectors by Hurricane Katrina.LSU AgCenter Extension Service Report, October 2005.
Guidry, K.M. (2005). Assessment of damage to Louisiana agriculture, forestry, and fisheries sectors by Hurricane Rita. LSU AgCenter Extension Service Report, October 2005.
Guidry, K.M. (2009). Updated estimates of the impact to agriculture from excessive rains in September and October 2009. LSU AgCenter Extension Service Report, December 2009.
Guidry, K.M. (2011). Updated estimates of the impacts to agriculture from Mississippi River flooding. LSU AgCenter Extension Service Report, June 2011.
Guidry, K.M., and Caffey, R. (2008). Estimated impact to agriculture, forestry, and fisheries from Hurricane Gustav and Ike. LSU AgCenter Extension Service Report, December 2008.
Guidry, K.M., and Pruitt, J.R. (2011). Preliminary estimates of drought impacts to Louisiana agriculture in 2011 (staff report 2011-09). Baton Rouge, LA: LSU AgCenter Department of Agricultural Economics and Agribusiness.
Guidry, K.M., and Shoalmire, L. (2004). Estimated economic damages sustained to Louisiana agriculture from adverse weather conditions in 2004.LSU AgCenter Extension Service Report, November 2004.
Guidry, K.M., and Shoalmire, L. (2001). Estimated losses to Louisiana agriculture from Tropical Storm Allison. LSU AgCenter Extension Service Report, September 2001.
Guidry, K. M., Caffey, R., and Fannin, J. M. (2009). How big is the number and why should we care? An evaluation of methods used to measure the economic impacts to the food and fiber sector from the 2008 hurricane season. Selected Poster Presented at the Annual Meetings of the Southern Agricultural Economics Association, Atlanta, GA.
Guidry, K.M., Shoalmire, L., and Johnson, G. (2002). Estimated economic losses to Louisiana agriculture from adverse weather events in 2002.LSU AgCenter Extension Service Report, December 2002.
Kliesen, K.L. (1994). The economics of natural disasters. The Regional Economist, April 1994. Available online: http://www.stlouisfed.org/publications/re/articles/?id=1880
Louisiana State University Agricultural Center Cooperative Extension Service. (2011). Louisiana Summary of Agriculture and Natural Resources. Available online: http://www.lsuagcenter.com/agsummary/
Ortego, A., Guidry, K.M., Dunn, M., and Shoalmire, L. (2000). Estimates of drought damage to Louisiana farmers, forest land owners, and aquaculture producers for 2000. LSU AgCenter Extension Service Report, December 2000.
United States Department of Agriculture World Agricultural Outlook Board. (2012). World Agricultural Supply and Demand Estimates. Available online: http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1194
Kurt Guidry (firstname.lastname@example.org) is Gilbert Durbin Professor and Extension Economist, Department of Agricultural Economics and Agribusiness, Louisiana State University Agricultural Center, Baton Rouge, Louisiana. J. Ross Pruitt (email@example.com) is Assistant Professor and Extension Economist, Department of Agricultural Economics and Agribusiness, Louisiana State University Agricultural Center, Baton Rouge, Louisiana.