After Katrina: $2 billion ag loss estimate could be low
Sep 21, 2005 4:44 PM, By David Bennett
Shortly after Hurricane Katrina did her savage business, Terry Francl estimated immediate losses to agriculture would reach $2 billion. Now, in mid-September, the American Farm Bureau Federation chief economist wouldn’t be surprised if losses climb even higher.
“I said direct impact costs from Hurricane Katrina — that is, the loss of crops, livestock, poultry and other aspects of agriculture — would be close to $1 billion. Another $500 million hit is associated with losses in exports and the resulting impact on local prices due to the closing of the New Orleans port. I said another $500 million would be lost to higher fuel and energy costs — higher fertilizer costs also fall in this category.
“The caveat is those estimates were based on very sketchy information that required me to make a lot of assumptions.”
Like many, Francl is extremely concerned about backed up traffic on the Mississippi River and properly functioning elevators. In compiling his first set of numbers, Francl concentrated on immediate losses. However, the impact of slowed barge movement “may be felt throughout the entire harvest season — especially in the case of the Midwest.”
Currently developing basis charts, Francl said his findings are sobering. “I’m looking to the first of October before making another set of estimates. At that time, I’ll see where we are with the logistical system to handle our grains and soybeans. I hope we’ll be in the process of clearing things up by then.”
If not, though, “we may end up taking the current horrendous basis levels — and they’re huge — right through harvest. That’s a serious worry.”
The basis is the difference between local cash price and the futures price, reflecting transportation charges to the terminal markets as well as overall export demand. “Consequently, U.S. grain and oilseed producers may see the cash prices bid for exported crops decline another 5 to 10 cents per bushel while the Gulf ports are effectively shut down for repair and restoration,” wrote Francl in the report. “This equates to tens of millions of dollars in the form of lower prices and perhaps even more in the terms of loss to export markets.”
Asked about other areas of impact, Francl pointed to Delta poultry and cattle. In Mississippi, “I understand some 2,400 poultry houses were damaged to some degree. Around 400 were totally destroyed. Between 5 million and 6 million birds were lost.”
As a result, in the second week of September, poultry prices were up anywhere from 2 cents to 6 cents per pound. However, given that poultry turns over so quickly, the impact shouldn’t go past 30 to 60 days, said the economist.
However, another problem for the poultry industry is the loss of cold-storage facilities. That affects the export market funneled through the Gulf ports.
Regarding beef, “there are reports out of a single parish in Louisiana that thousands — 10,000 or more, perhaps — head of cattle can’t be located. That alone is a huge loss.”
Also, dairy facilities have been damaged and animals lost. “The big problem, though, is an inability to market milk. That’s due to lack of electricity. Many have generators but are having trouble finding enough fuel to keep them running. Consequently, they’re dumping a huge amount of milk. In some cases, they’re unable to milk the herds.
“Unfortunately, I don’t have hard monetary numbers in regard to livestock, dairy and poultry losses. They will be significant, though.”
And then there’s the timber industry. “The losses in timber could be the worst. I’ve heard estimates of $1 billion or more.”
All this is bad enough. But Francl insists his estimates be put into context next to those who experienced “direct devastation and loss of life” due to the hurricane.
“To them, these (estimates) must seem insignificant. Still, it’s undeniable that the dollar losses have built up very quickly.”
e-mail: dbennett@primediabusiness.com
