USDA is taking steps to reduce stress on the grain transportation system caused by Hurricane Katrina. According to Agriculture Secretary Mike Johanns, this includes assisting with the movement of barges of damaged corn from New Orleans; providing incentives for alternative grain storage; encouraging alternative shipping patterns to relieve pressure; and allowing producers to store USDA-owned corn on the farm with the option to purchase.
“These actions, in conjunction with the tremendous work being performed by the U.S. Army Corps of Engineers, will help the transportation system return to normal as quickly as possible,” said Johanns. “The drought is contributing to the stress along the Mississippi River by decreasing the flow, so we are encouraging alternative routes and means of transportation in addition to the steps we are taking to relieve the pressure on farmers and related businesses.”
Steve Nail, president, Farmers Grain Terminal in Greenville, Miss., says grain movement down the river and at the Gulf is improving. “I feel more confident each day. But we're not out of the woods yet. If we have the size crop that USDA is projecting in corn and soybeans, we're going to have some struggles handling it.”
USDA is providing a temporary incentive to assist immediate movement of around 140 barges of damaged corn (over 7 million bushels) out of New Orleans to up-river locations. Once unloaded, the empty barges will continue up the river to load and begin moving new-crop commodities.
In addition, to help producers deliver and sell crops in the absence of barge transportation caused by the hurricane, USDA also will pay incentives for alternative storage of up to 50 million bushels of grain. These actions are expected to ease pressure on producers to market commodities under adverse conditions.
To reduce stress on the central Gulf transportation and handling system, USDA will provide a transportation differential to cover the costs of moving grain to other river transportation modes and handling and locations.
USDA will also allow producers forfeiting commodities to USDA the opportunity to buy back the grain when their farm-stored loans mature at the end of September and October. This opportunity to purchase is offered on a state-by-state basis and will be available for 60 days at the posted county price.
These producers typically would be required to immediately move the forfeited commodity to commercial warehouses. This would reduce the pressure on commercial storage availability, according to USDA.
Nail says a more pressing issue for now is low water levels in the Mississippi River. “We're not to pre-Katrina levels yet, but those levels are coming according to the forecasts.”
If low-water restrictions are imposed, it will require more barges to load the same amount of bushels, which will push up freight costs, according to Nail. “Even so, barge freight has eased up over the last 24 hours (as of Sept. 21). Instead of being quadruple last year's rate, we're only double.
Nail said that additional storage capacity in the Mid-South would help in situations like this. “But there are more years when it doesn't help. When the Mid-South is harvesting its crop, it's usually at the tail-end of the old crop year. In recent years, there has been a good premium, sometimes a tremendous premium for selling early beans and moving them as fast as you can.
“So if we build a lot of storage based on this year, we may end up with a lot of it empty in the future. But I suspect that there will be a lot of people looking into additional storage. Certainly, we will.”
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