Immediate Agricultural Impacts Of Hurricane Katrina

Direct damage done to crops and livestock by Hurricane Katrina is conservatively estimated at $1 billion, according to Terry Francl, senior economist with the American Farm Bureau Federation. Considerable harm was done to sugar cane, cotton, soybeans and corn crops in Mississippi and Louisiana. However, the effect on farm production and prices nationwide could be eased as there had been strong harvests of crops elsewhere.

However, Katrina’s impact is already being felt throughout the U.S. agriculture industry in the form of a severely crippled river shipping and Gulf port system and rising fuel costs, Francl said. The lack of shipping movement on the Mississippi was holding up corn and soybean exports, and prices paid to growers were being cut. Rising fuel prices due to the disruption of oil output would further undercut growers’ bottom lines, Francl said.

Meanwhile, The U.S. Army Corps of Engineers has begun assessing the Mississippi River Channels and the deep-draft ports in the Gulf region to determine any impediments to navigation, according to Randy Gordon, of the National Grain and Feed Association. The Coast Guard also is doing underwater surveys and report navigational aides such as buoys missing and misplaced, as well as an unusual amount of silt.

It also remains to be seen how port and river traffic will be handled. Should the government prioritize in some way, it is possible grain going out could be lower priority than humanitarian relief or even oil or steel components coming in.

Farmers also will have to put off locking in fertilizer prices this fall until the industry gets a better handle on its ability to move fertilizer product following Katrina. U.S. Gulf port at New Orleans is the primary port of entry for urea imported into North America. The U.S. imports more than 40% of urea about half of the nitrogen used on its farms.

If the imports can not move inland, fertilizer prices could continue to rise ahead of the fall application season. Natural gas disruptions are also causing problems in the domestic fertilizer industry since nitrogen fertilizers are produced from natural gas.

Potential Spread Of Rust To Have Minimal Impact On Soybean Crop

USDA predicted that Hurricane Katrina could spread soybean rust spores further throughout the Midwest. Eastern Texas, Arkansas, Kentucky, southern Indiana and Ohio have all been named as states that could be susceptible to an outbreak of the disease.

However, the risk to crops from the disease is minimal as even if plots are infected. USDA expects that it could take up to a month before the disease reached a critical stage, long after the crops have reached maturity, thus decreasing the potential for damage. This would also leave plenty of time to spray crops with fungicide, USDA said.

Many Factors Lead To Lower Planted Area In Brazil

USDA expects Brazil’s 2005-06 soybean area at 21.9 million hectares and production at 61 million tonnes. Despite a reduction in area from last year, due primarily to poor returns for the 2004-05 crop, a more normal yield is expected to lead to record production.

USDA’s forecast is below that of some private analysts in Brazil. For example, Safras and Mercado forecast the crop at 63.5 million tonnes while Celeres foresees a crop of 63.1 million tonnes. Most, but by no means all, private estimates say that area will fall, with the FNP Institute forecasting area down 7 percent from last year and the Brazilian Association of Soybean Producers (Aprosoja) forecasting a 4 percent reduction. USDA sees this dramatic area reduction forecasts as excessive and possibly meant to encourage small producers to reduce area, thus supporting prices.

USDA says the expected reduction in Brazil’s planted area is due to five primary factors: current low commodity prices; a strong currency; a high rate of unpaid debts; tight private credit; and high input costs.

USDA believes the greatest obstacle for Brazil’s producers is the current exchange rate. Most producers purchased imported inputs for planting last year’s summer crop at an exchange rate of 3 reals/dollar but sold the crop at around the current rate of 2.3 reals/dollar. At the current rate, dollar returns on soybean are said to be very discouraging to producers.

USDA forecasts Brazil’s soybean exports from February 2006 to March 2007 at 24 million tonnes. The estimate is based on the expected greater supply as a result of the increase in production as well as less export competition from the United States, according to USDA.

Lack Of Monsoon Threaten India’s Soybean Crop

Monsoon activity in India further weakened over the past two weeks, which is likely to have a negative impact on production of soybeans, according to USDA. Monsoon rains have mostly been confined to northeastern states and a few places in central and south India, which were earlier experiencing below normal rainfall. Most parts of western and northern India remained dry for the third consecutive week.

Rains are badly needed in India for normal crop development. An early withdrawal of the monsoon from north and central India could not only jeopardize the standing crops, but could also adversely impact planting of crops this fall.

Soy Complex Up As Gulf Exports May Resume Earlier Than Expected