Flood Damages Could Triple : Economy: Estimates range up to $10 billion. Many individuals’ homes, farms are uninsured.
Flood waters are now receding in some parts of the water-logged Midwest, but damage and losses from the record flooding may be worse than feared, in some cases triple initial estimates.
And while a final assessment is still weeks away, public and private economists are generally boosting their estimates of the deluge’s fiscal fallout.
“The flooding has kept going on and on, and it’s a safe bet that damage will be far worse than at first feared,” said Marvin Davis, a spokesman for the Federal Emergency Management Agency in Washington.
The economic effects are mainly regional and local, disrupting the lives and livelihoods of residents in the Midwest and in cities and towns along the unruly rivers. For residents, the cost is devastating: total damage estimates now range as high as $10 billion, rapidly approaching the $17-billion loss from Hurricane Andrew.
The damage affects nearly all elements of economic life in these areas: drowned crops and flooded farmlands, layoffs and cargo delays from disrupted rail and barge traffic, businesses forced to close and furlough workers. And, as in any disaster, the losses fall heaviest on individuals, many of whose homes and farms are uninsured.
Fortunately, most economists expect only a minimal effect on the nation’s economy as a whole or on supermarket food prices. But because much of the damage is uninsured, economists don’t foresee the temporary economic boost that comes with rebuilding, as happened after Hurricane Andrew.
The total losses covered by private insurance from four flood catastrophes between mid-June and mid-July now amount to $655 million, according to the Property Claim Services unit of the American Insurance Services Group, an industry organization in Rahway, N.J. Earlier, the group had estimated covered damages from the first three storms at $280 million.
About 20 million acres of cropland have been affected, 8 million of which are completely under water. The full extent of crop losses will be clearer when the U.S. Department of Agriculture releases its August report.
The Labor Department on Thursday said job losses related to the flooding helped push first-time claims for unemployment insurance in the week ending July 24 to the highest levels in 10 months.
Railroads, whose trains have been rerouted by flood water, were once expected to lose as much as $15 million each. In the case of the larger railroads, that number is closer to $60 million or $70 million, according to the Assn. of American Railroads. About 1,200 miles of track remains out of service.
Barge operators are losing $3 million to $4 million a day as barges lie idle, according to the American Waterways Operators Assn., a trade group in Washington. That’s an increase from the $2 million estimated a couple of weeks ago. All told, about 7 million tons of cargo is being held up, valued at $1.6 billion, the group estimated.
But the upheaval of the flood is felt perhaps most acutely by individuals such as Iowa farmer Larry Van Genderen.
Van Genderen, 34, a third-generation farmer, says his 1,000-acre farm lies right on the Des Moines River, a mile from the small town of Eddyville. The river has flooded about half of Van Genderen’s corn and soybean crop, and the constant rains are damaging what’s left.
“It’s been raining here every day, and our corn and beans on the hills aren’t looking very good either,” he said. “The plants are short, yellow and stunted, and won’t (produce) anything.”
Still, most economists agree that the flood will have a minimal effect on the nation’s economy as a whole, with food prices only moderately higher. And some contrarians even argue that actual damages may be lower than expected.
“Sometimes (the numbers are) a little overstated,” said Ram Mahidhara, a senior research associate at the University of Illinois’s Regional Economics Applications Laboratory. “Most economies are pretty resilient. . . . If you look at the long-run picture, in the next five to seven years, in terms of the national scene, this flood will be no more than a blip.”
So far, however, reports suggest that the damage will continue to mount.
The Federal Reserve Bank of Minneapolis increased its estimate of total flood damage in Minnesota, Wisconsin and South Dakota to $2 billion from between $1 billion and $1.5 billion earlier in the month, said Edward Lotterman, the bank’s agricultural economist.
Iowa crop losses are mounting weekly. The state Department of Agriculture and Land Stewardship now estimates that 30% of the corn crop and 33% of the soybean crop is in poor or very poor condition--up 21 and 13 percentage points, respectively, from two weeks ago.
Missouri estimates that 1.78 million acres of crops, or roughly 12% of the total, are being lost to the flood, with crop losses worth about $700 million. The acreage could mount as high as 30% or 35%, the state Department of Agriculture estimated.
Even so, the flooding should not affect national food prices significantly. If the total crop of corn and soybeans falls 3% to 4%, prices for corn would increase to $2.20 per bushel from an expected $2.09 before the flood, and to $6.38 per bushel for soybeans from an expected $5.55, according to the Food and Agricultural Policy Research Institute at the University of Missouri in Columbia.
“This will barely cause a blip in the prices consumers pay at the supermarket,” said Abner Womack, director of the institute.
Indeed, prices for corn and soybeans on the futures market have already fallen from their highs a week or so ago, said Daniel Basse, director of research at AgResource Co., a Chicago grain analysis firm.
“As long as the crops are not along river bottoms or tributaries, they have an opportunity to recover, and both corn and soybeans can recover nicely with the right combination of sunshine and warmer temperatures,” Basse said. “We are already seeing signs of a fairly dramatic recovery in terms of conditions.”
Another factor: there is still surplus grain left over from the bumper crop of 1992, much of it sitting in grain elevators or on barges on the flooded Mississippi River, unable to get to market. When the river finally opens, that grain will have only a short time to get to market before the fall harvest comes in, Basse said.
“We may be looking at two harvests this year,” he said--and that will be sure to depress prices.
The Economic TollSome damage estimates from the Great Flood of 1993:
* Total losses: Approaching $10 billion.
* Crops: About 20 million acres damaged, including 8 million acres still under water. In Iowa, 30% of corn crop and 33% of soybean crop in poor or very poor condition. In Missouri, about 12% of acreage lost, with crop losses totaling about $700 million.
* Jobs: Applications for unemployment insurance shot up 43,000 nationwide last week, mostly due to closures or curtailments of Midwest businesses but also due to scheduled General Motors plant shutdowns. Flood-related job losses expected to continue for weeks.
* Transportation: For railroads, about 1,200 miles of track remains out of service. Lost business and repairs expected to exceed $200 million. For barges and ferries, lost business put at about $3 to $4 million per day. About 7 million tons of cargo held up, valued at $1.6 billion.
* Insurance: Losses covered by private insurance expected to be as high as $655 million. Vast majority of losses uninsured.
* Food prices: In the worst-case scenario, prices for corn would increase approximately 5% to $2.20 per bushel, with soybeans rising about 15% to $6.38 per bushel. This would not significantly boost prices at the supermarket level.