Water levels, Katrina, costs challenge Farmers Grain Terminal

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Published: October 17,2005

Farmers in the three-state Delta area served by the Farmers Grain Terminal Inc. cooperative were being impacted by higher shipping costs due to low water in the Mississippi River and higher fuel costs even before Hurricane Katrina struck August 29.

“The low water levels had already affected both the ability to ship and the cost of shipping,” said Steve Nail, president and CEO of Farmers Grain Terminal. “We load barges at several locations, and the companies that have the barges had restricted the amount of draft we had been able to load into the barges.”

For example, rather than being allowed a 12-foot draft on 14-foot-deep barge, there were restrictions of 9 to 9.5 feet before Katrina. Because of that, more barges were needed to load the same number of tons of grains.

“The effect of that along with higher diesel prices had moved barge prices to about double what they were last year,” Nail said. “Then along came Katrina.

Several things happened with that. The grain business is like a big supply chain going from farmers through elevators, barges or rail cars, and winding up at processors or at the Gulf for export. Katrina jumbled up things really bad. The normal flow of barges being loaded, unloaded, transported back for reloading was totally messed up. As a consequence, the availability of barges got even tighter because ones heading for export through the Gulf were unable to be unloaded.”

Costs soar

Nail said freight that had already doubled in cost from last year doubled again. At the peak, freight costs were three to four times higher than a year ago.

“We’re the middle man between the farmer and the export market,” Nail said. “Any other grain buyer in our position is the same. We have eaten part of the cost, and passed part of it along. Most of the cost was passed along to the farmers. So the farmers are suffering the effects of the hurricane and the low river due to higher freight cost.”

Farmers Grain Terminal has a membership of about 5,000 in Mississippi, Arkansas and Louisiana, and sales of about $200 million. The cooperative has nine grain elevators spread out in the three-state Delta area.

There are 10 large export grain elevators located along the Mississippi River in South Louisiana. The elevators were evacuated for the hurricane, and some stayed shut down for a while after the storm because of damages, or lack of power or personnel. Barges offload to the elevators, which then load large ocean going ships for export to foreign countries.

Nail said that a lot of people think they could change over to other forms of transport. But it isn’t viable to go either with rail or highways with the volume of product being dealt with. It also isn’t feasible to barge the grains to alternate sites in other parts of the country with other export facilities.

After Katrina, river levels went up for a time, and Farmers Grain was able to load barges heavier than before. But that didn’t last long.

“Then Rita came along, and while Rita didn’t do much damage to export elevators at the Gulf, they did shut down and evacuate elevators for safety reason until Rita passed,” Nail said. “So we had another hiccup in the cycle. They have restarted, and things are beginning to move again.”

But at the same time that is going on, the corn and soybean harvest is moving farther north into the Midwest, which produces far larger amounts of grain than the South.

“The mid-South and South are relatively small in grain production,” Nail said. “The big producers are those midwestern states like, Iowa, Illinois, Nebraska, Indiana and Minnesota. In those states, the harvest is kicking in. Their stocks of grain from last year were two to three times what they were a year ago. Rather than starting out empty, they have quite a bit of grain carried over from the year before. Less storage space to accommodate the new crop coming in means more pressure to ship out product by barge, rail and truck. Adding gasoline to the fire is one way to look at it.”

Back to normal

Shipping on the Mississippi is starting to get back to normal. Nail says it will just take some time to get things back into order during the busiest time of the year.

Harvest is nearly over for most crops in Mississippi. The corn harvest is almost complete, soybeans are about 80 harvested, and rice is 75% to 80% complete. Nail said people were pleasantly surprised with soybean yields.

“We had a hot, dry summer,” Nail said. “Some are attributing it to better seed genetics. Whatever the reason, soybeans yields were good this year overall. Corn was about average, maybe slightly above. Rice started out the same as last year or maybe a little lower. But once rains from Katrina came through, a lot of rice was blown over so the harvest has been pretty difficult on maybe 30% to 40% of the rice acreage. We have lost some rice in the field as a result. I’d guess rice yields will be down 10 to 15%.”

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

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