NEWS: Alarm Growing on Storm's Cost for Agriculture -- NYT 09/08/05

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SEPTEMBER 8, 2005 -- New York Times

 

ALARM GROWING ON STORM'S COST FOR AGRICULTURE

 

By Alexei Barrionuevo and Jeff Bailey

 

 

 

CHICAGO, Sept. 7 - Two weeks from the beginning of harvest season, there

is a mounting sense of alarm over a potential financial blow to American

farming. Farmers in the breadbasket states rely on barges to carry their

corn, soybeans and wheat down the Mississippi River, but cannot be

certain that the Port of New Orleans, a crucial link to export markets

that was badly damaged by Hurricane Katrina, will reopen anytime soon.

 

In the gulf states, the storm left farmers reeling from numerous other

problems, including a lack of electricity to restore chicken and dairy

plants to service, and a shortage of diesel fuel needed for trucks to

save dying cattle stranded on the breached levees.

 

For all of them, it is a race against time.

 

Farmers in some states in the Midwest had already endured the worst

drought in almost 20 years. The storm, moreover, flattened sugar cane

and rice fields in the South. And farmers nationwide must pay more for

fuel to bring the harvest in and transport crops, lowering the profit

they will earn when they sell them. Now Hurricane Katrina is adding to

the pain by threatening to curtail exports.

 

In all, the hurricane will cause an estimated $2 billion in damage to

farmers nationwide, according to an early analysis by the American Farm

Bureau Federation. The estimate includes $1 billion in direct losses, as

well as $500 million in higher fuel and energy prices.

 

Midwestern farmers are threatened by additional losses. Farmers are

clearing out stored corn and soybeans to prepare for this year's

harvest, which they normally begin exporting at the end of September.

But the hurricane caused substantial damage to waterways and

grain-handling facilities, and hundreds of barges have been backing up

on the Mississippi River with no place to go.

 

The latest blow to the farm economy comes at a delicate time for the

Bush administration, which has been pushing to trim farm subsidies to

comply with mounting pressure from the World Trade Organization to level

the playing field for producers in developing countries.

 

The post-Katrina troubles of American farmers could make it tougher for

the administration to push through an overhaul of subsidies that is

being sought by developing countries. That, in turn, could affect the

administration's effort to win new export markets for American

production. Some 27 percent of American farm receipts come from exports.

 

Higher transportation and logistical costs - including diesel fuel, rail

costs and barge rates - are slicing prices producers get for a variety

of commodities. Corn prices, for example, have dropped 15 to 20 cents a

bushel, or about a 9 percent decrease, based on Wednesday's price of

$2.17 a bushel on the Chicago Board of Trade, said Jerry Gidel, an

analyst at North America Risk Management Services in Chicago.

 

The farm sector's problems are in sharp contrast to its good fortune

last year. Driven by record-large crops, high beef prices and generous

farm subsidies, net farm income hit a record $82.5 billion in 2004. Now

the hurricane will put disaster relief programs into play and depress

commodity prices, leading to billions of dollars more in government

payments to farmers.

 

Next week, the House and Senate Agriculture Committees are expected to

issue reports on how they plan to cut $3 billion in Agriculture

Department programs from the federal budget.

 

Farm groups have been pushing for any trims to take place in the food

stamps and conservation programs, while the Bush administration has

proposed ending the cotton subsidy program, which the World Trade

Organization has ruled illegal in parts after complaints from Brazil and

other cotton producers.

 

But the devastation wrought by the storm - and the ensuing economic

impact on farmers both near the gulf and several states away - could

alter the debate in Washington and hamper crucial trade talks scheduled

for a December meeting of the World Trade Organization in Hong Kong.

 

"Without question, this makes the reforms that a lot of the rest of the

world would like to see happen here in the U.S. a lot more difficult,"

said Clayton Yeutter, a former secretary of agriculture and United

States trade representative. "The general psychology of the event is

clearly negative."

 

In recent weeks, Agriculture Secretary Mike Johanns has been

crisscrossing the nation talking to farmers. His message is the need to

reduce farm subsidies both to open more export markets to American

farmers and to comply with international free trade agreements. "There

is a real conditioning going on here," said Keith Bolin, a corn and hog

farmer and president of the American Corn Growers Association, who

attended a session last week in Decatur, Ill., three days after the

hurricane. "Get used to less, get used to less. That's the message."

 

After two failed efforts at trade negotiations in the so-called Doha

round, another failure in Hong Kong could be devastating to developing

countries, which are desperate to lift their economies through access to

markets in Europe and the United States.

 

The World Trade Organization is working to remove $280 billion in

subsidies among the world's richest countries. Of that, American

taxpayers and consumers paid $47 billion to farmers last year, an amount

equal to about 20 percent of farm receipts, according to the World Bank.

 

But Mr. Yeutter and others said the emotional and financial impact of

the hurricane on farmers will be tough to ignore in Washington.

 

The American Farm Bureau Federation estimated that Louisiana would lose

two million tons, or 20 percent, of its sugar cane crop. That would

reduce the total United States sugar harvest by 3.5 percent, according

to the analysis.

 

In Franklinton, La., a milk-processing plant is struggling without power

to dump 60,000 gallons of stored milk that has gone bad. At some nearby

Louisiana dairy farms, farmers have continued to milk cows, but with

nowhere to sell the milk, they have simply dumped it down the drain.

 

Some 25 million pounds of milk at plants in Louisiana, Alabama and

Mississippi could be lost over the next month if the plants do not

return to operation soon, said Michael Danna, a spokesman for the

Louisiana Farm Bureau Federation.

 

Louisiana sugar cane farmers are worried that they may have to delay

delivering their crop to mills while they wait for fields to dry long

enough to apply an agent that ripens sugar cane, increasing the sugar

content and making the crop more salable.

 

The delay could put the farmers dangerously close to the onset of winter

frost, Mr. Danna said.

 

In Covington, La., thousands of cows are stranded in two feet of

brackish water on the levees near New Orleans. Mike Strain, a

veterinarian and co-owner of the Strain Cattle Company, struggled

Wednesday to find a plane to airlift hay into the area to give his

remaining 400 head of cattle "enough strength and energy to get them out

of there." Already, well more than half of the 1,100 animals in his herd

have perished, costing his company $2 million in uninsured losses.

 

"The timetable for survival is diminishing rapidly," said Dr. Strain,

who is also a state legislator. "The death loss of cattle in southeast

Louisiana will be 80,000 to 100,000 head when it's all tallied. That's

50 to 70 percent of the herd here, and that's before disease sets in."

 

Dr. Strain's rescue efforts are being severely hampered is a lack of

diesel fuel to move the cattle to a ranch 100 miles north. "There is no

fuel in the service stations that have power. That's just unconscionable."

 

Government officials are hoping for the best. Mr. Johanns, the

agriculture secretary, said Wednesday that he was encouraged by the

progress so far in restoring the flow of commerce on the river. He said

ships are moving again and the majority of grain elevators in the region

are resuming operations, at 63 percent of capacity.

 

"We are assuring our international customers that we expect minimal

disruptions," Mr. Johanns said in a statement. He said workers were

focused on restoring power, ensuring adequate staffing and reinstalling

navigational aids to allow safe passage of ships.

 

Given a nighttime curfew, little electric power and potentially

hazardous and disease-ridden working conditions, the issue of who will

operate the ports remains unclear, with some analysts saying the

military or National Guard may have to step in.

 

A union representative expressed confidence Wednesday that such severe

measures would not be needed. The International Longshoreman

Association's more than 500 regular New Orleans dock workers - nearly

all of them evacuated to other cities - could be ready to work there

"immediately," said Benny Holland, vice president of the union.

Additional workers are available, if needed, from regional ports, like

Gulfport, Miss., that are not operating, he said.

 

Most nations that import large amounts of agricultural commodities

shipped through New Orleans and other gulf ports have plenty of

stockpiles to ride out any disruption in shipping, the Agriculture

Department's chief economist, Keith Collins, said in an interview. "I

don't think any of them are in any kind of jeopardy," he said.

 

China, the largest buyer of United States soybeans, for instance, is

estimated to have 4.1 million tons on hand, equal to about 10 percent of

its annual consumption. Japan, the biggest foreign buyer of American

corn, has about 1.3 million tons in storage. "That's a typical number

for them," Mr. Collins said.

 

Some of the slaughtered chicken in storage at ports in New Orleans and

Gulfport was lost, but production, which totals about 8.8 billion

broilers a year in the United States, is little affected.