From Deseret News archives:

Katrina may hurt shipping of crops

Transportation woes come on heels of months of drought

Published: Friday, Sept. 16, 2005 12:40 p.m. MDT
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"It's a fight for barge space right now," said Dwight Asselmeier, grain merchandiser at Gateway FS Inc. in Red Bud, Ill., the grain elevator where Mueller generally stores his grain. Gateway's elevators, capable of holding 4 million bushels, are already are nearly full, forcing growers to find other storage.

The shrunken barge fleet has sent shipping costs up sharply.

At northern Illinois' Normandy Elevator near Walnut, for instance, manager Art Heidenreich says the cost of barge freight he uses to move half of his corn to southern U.S. markets — he uses rail for the rest — has spiked 40 cents a bushel since Katrina.

That is putting the squeeze on farmers.

The price farmers get for a bushel of corn went from $1.96 before Katrina made landfall to $1.68 six days afterward, according to a survey of seven grain elevators along the Illinois and Mississippi rivers by Illinois State University agricultural economist Rick Whitacre.

The price drop "was like falling off a ledge," Whitacre said.

The price has rebounded by about 15 cents a bushel, but remains substantially lower than what farmers were paid at this time last year.

In its monthly crop report released Monday, the Agriculture Department upped the forecast for corn by 289 million bushels to 10.64 billion bushels, down from last year's 11.8 billion bushels. Prices should average $1.70 to $2.10, down 10 cents from last month. Last year's average was $2.06.

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As of Tuesday, for instance, Heidenreich's Normandy Elevator was offering $1.615 a bushel for corn.

Crops usually change owners several times before being shipped from the Gulf of Mexico. Farmers often sell newly harvested corn or soybeans to the local grain elevator, which may sell to a river terminal or agribusiness company terminal. From there, crops are loaded onto barges for the trip to the Gulf, where barge cargo is loaded into export terminals and then onto ships.

Commodities pricing isn't an exact science. After buyers and sellers on the Chicago Board of Trade set the general price of corn, elevators deduct from that what they would pay to get the grain to a particular market, factoring in the key issue of transportation and, to a lesser extent, cost of drying the grain.

It's hard to determine what depressed commodity prices will mean to U.S. consumers. Some experts say higher transportation costs could nudge up the price of goods like corn syrup or corn flakes. But Dennis Conley, a University of Nebraska agricultural economist, said the problems with shipping goods overseas could increase U.S. inventories, lowering production costs for food makers that could get passed along to consumers. The price of chicken and red meat could also fall, since corn is used as animal feed, he said.

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James A. Finley, Associated Press

Glen Mueller sits in the cab of his combine during the corn harvest Tuesday. He expects Katrina to push up his costs and cause shipping delays.

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