from Follow the Money

The Port of New Orleans, once again

October 6, 2005

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It seems that George Friedman of Stratfor is right: it is hard to operate a port without a city.  The Port of New Orleans is open, but hardly operating at full capacity.   From the New York Times:

More than a month after Katrina struck New Orleans, as much as 80 percent of the port's operations remain shut. And getting them back up is in many ways out of his control: Many of the hundreds of workers needed to run the port are living in other states. Several of the rail lines into the port were torn apart by the storm; road access for tractor-trailers remains limited.


Indeed, the port is perhaps the prime example of the conundrum that New Orleans faces as it seeks to restart its economic engines. The city needs the port to begin generating revenue and jobs again. But the port cannot get back on its feet until many of its workers return. And that is not possible until city services are restored and housing built or rebuilt.


The Times also has a nice picture showing the location of the various ports on the Mississippi.   Continues
 

 

The broader impact of Katrina on the "plumbing of US trade" is also becoming a bit more clear.

The September trade data will be all scrambled - with disruption to both imports and exports. 

But it looks like the October trade data could show a rise in imports.  No doubt some imports through the Louisiana ports will still be disrupted.  But it seems clear that petroleum imports will be way up.  Imports are helping to make up for reduced production in the Gulf.

And agriculture exports will likely be lower than they otherwise would be.  The Port of New Orleans handles a fair amount of grain, and barge traffic still seem to be bottled up.  High shipping costs on the Mississippi are creating a strong incentive for farmers to defer shipment til later.  

But the biggest problem may be the shortage of barges where they are needed most - upriver. Low river levels before the hurricane had already slowed shipments. Then, when Katrina struck, many of the barges were caught near New Orleans, waiting to be unloaded or ready to head north.

Navigation restrictions, power cutoffs and labor shortages only added to the delays in getting the barges back where they would normally be at this time of year. And just when the river traffic began to recover, Hurricane Rita made the problem worse.

The shortage of barges has driven freight costs to levels higher than anyone along the Mississippi can recall.  "Even though you have a big yield, you can wind up with very little money left in your pocket," Mr. Bell shouted over the roar of his combine, sweeping up thigh-high amber soybean stalks one recent warm September afternoon.

Farmers who can store rather than sell probably will.  That will push some agricultural exports that normally would be booked in 05 into 06.  

But there agricultural exports will be down for another reason as well: global prices for corn and beans are down.  Yet the imported inputs needed to produce those crops - basically petroleum for fertilizer and fuel - cost much more.  That is the global version of the squeeze many farmers are feeling.  

US exports of corn and soybeans are probably too small relative to overall exports for this to have a truly significant impact on the overall data.  But when combined with the expected impact of the dollar's rally against the euro during the course of this year, it adds to my sense that US export growth is likely to slow a bit.

Incidentally, I suspect that the prices quoted on the Chicago Board of Trade may be the wrong place to look for the impact of Katrina on grain prices - the impact probably shows up more from a wider spread between the price in the global market and the price farmers get at various river terminals and grain elevators.    A higher spread would cover the higher cost of shipping now relative to the cost before the "plumbing" of the Midwest's agricultural economy got all scrambled.  Most alternatives to barge transport are uneconomical in part because they use petrol - which is not exactly abundant or cheap.    Don't worry too much though; plenty of folk are hard at work to make sure farmers get their fair share of post Katrina aid ...

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