Bottled-Up River Prevents Ships From Reaching Gulf
Hurricane Katrina has closed the door on the biggest passageway in American agriculture, the mighty Mississippi River, triggering shifts that will hurt farmers and cut exports even as they boost the fortunes of rival transportation systems.
As the first assessment of New Orleans’ port conditions circulated Thursday, experts said it might be next year before cargo movement returned to normal there and upriver at the even bigger Port of South Louisiana.
“I wouldn’t be surprised not to see it for months,” said David Sehrt, chief operating officer of the largest barge company, Ingram Barge. “Most of the terminals don’t have electricity, and nobody has any workforce.”
The U.S. is the world’s biggest agricultural exporter, and most of what is sent abroad floats down the Mississippi on barges and out from one of the Louisiana ports on ships headed out into the Gulf of Mexico.
Now, many fully loaded barges are drifting with nowhere to go. As the Coast Guard and other officials make their inspections, the lower Mississippi is closed to commercial traffic.
The barges could be sent elsewhere, said Sehrt, but “people haven’t made arrangements, they’re kind of waiting to see how long it’s going to take” to reopen the waterway and its ports.
The traffic jam has left the barge companies unable to take on new loads just ahead of their busiest season.
“It’s been really, really tough on us financially,” said Bob Gardner, president of Kentucky-based Barge America.
Large quantities of grain originally headed for export already are languishing in Midwest elevators. Grain brokers with nowhere to send their stocks are offering less to farmers, who are trying to unload the remnants of 2004’s crop before this year’s harvest -- which is just beginning and will peak in a matter of weeks.
“We still have a lot of corn in the bins from last year that needs to find a world market before the harvest starts,” said Iowa Farm Bureau head Craig Lang. “Even a one- or two-day stop will really block the lines.”
Contract prices for corn to be delivered in December hit their lowest prices since June on Wednesday, although prices edged up Thursday on speculation about coming dry weather.
“As soon as you shut the Gulf off for exports, your entire river system has lost its market,” said Jay Fitzgerald, an agricultural broker for Advance Trading Inc. in Bloomington, Ill. “The values went down almost immediately.”
Consumers aren’t likely to benefit, however, because grain makes a number of stops before it reaches grocery stores and because energy costs are rising for processors.
And they may see an increase in coffee prices. New Orleans, one the nation’s biggest coffee ports, holds about 8% of the world’s supply, and coffee industry experts predicted that the loss of the tens of thousands of tons stored there would take a year to replace. Coffee contracts have risen 11% this week in New York trading.
“The market has decided that all of the 1.6 million bags stored in the New Orleans warehouses is dead meat,” said commodities analyst Ann Prendergast of Refco Group.
Procter & Gamble Co., maker of Folgers, said half its supply was unaccounted for.
If the shipping problems continue more than three weeks -- well into the new harvest -- world markets may be affected, said FTN Midwest Securities Corp. analyst Christine McCracken.
“You’re probably looking at modestly higher prices,” she said. “Given where we are in the harvest, the clock is ticking.”
New Orleans also serves as an import point for a variety of other cargo, including machinery, oil and steel. In all, about 6,000 sea-going vessels pass each year through the Port of New Orleans, which includes a series of wharves, warehouses and terminals strung along several miles of the city’s riverfront and on the Industrial Canal.
Many of the wharves suffered damage, port officials reported in an e-mail circulated to other ports early Thursday.
“Yesterday, I thought the damage could have been worse,” Port of New Orleans President Gary LaGrange said in the e-mail from his spokesman. “Today, I’m not so sure.”
One major impediment to reopening the port is the lack of workers, LaGrange said, because many port employees have left the flood-ravaged city. In addition, railroads that serve the port were still having to route trains around New Orleans because of damage to tracks and rail bridges.
While they wait for the Louisiana ports to reopen, shipping companies are turning to other ports and rail routes as alternatives to the river.
Some agricultural products and another Mississippi mainstay, coal, will move onto railway cars, straining capacity and pushing shipping prices up, analysts and companies said.
Much of the coal is expected to head for Baltimore, said broker Dan Vaughn of United Power Inc., because that city’s port has some of the specialized equipment and facilities that were in place at storm-damaged ports.
“Railing to Baltimore is exactly what they’re looking at,” Vaughn said.
Coal prices have risen as dealers factored in new travel expenses for domestic producers and the loss of imports coming up the Mississippi.
Trucking companies won’t gain much because most bulk commodities aren’t worth shipping that way. It takes 60 semi-trucks to haul what fits on a single barge.
The largest port set to gain from diverted traffic is Houston.
One ship headed to New Orleans with Oklahoma-bound rubber and timber has been diverted to Houston, and officials there have been fielding constant calls from companies making contingency plans, said port spokeswoman Felicia Griffin.
One company exploring whether to divert shipments through Texas is Decatur, Ill.-based Archer Daniels Midland Co., the agricultural products processor, said spokeswoman Karla Miller.
As for taking other business from Mississippi River barges, Griffin said: “obviously with the way the situation is, we’re all anticipating that may be a strong possibility.”
Smaller ports, like that in Panama City, Fla., have already agreed to handle much more cargo.
“We do a million tons of cargo a year, and we increased to [a rate of] a million and a half tons a year almost overnight,” said Port of Panama City Executive Director Wayne Stubbs. One new customer will be the port’s first regular container-ship line, which is switching a Mexican route to Panama City from Louisiana’s Port of Bienville.
Port of Los Angeles spokesman Arley Baker said L.A. had yet to receive any inquiries about redirecting cargo.
“It is too early to tell,” Baker said. “I think it will all pan out in the weeks and months ahead in terms of any cargo that is bound through the Panama Canal or through ports south of us.
Eventually, logistics consultant Satish Jindel said, the Louisiana, Mississippi and Alabama ports will return to full strength. The lower Mississippi already is being tested to determine if it is safe for navigation.
The port of Mobile, Ala., may be back in operation within a week, said Neil Turner, who handles forest-product shipping from there for Norwegian line Star Shipping Inc.
“We’ve already diverted two of our ships,” Turner said while driving around looking for gas. “It’s just temporary. As soon as everything gets cleared up in the port, we’ll be back.”
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Vital to trade
Top trade commodities at the Port of New Orleans in 2004
(Imports and exports combined, in billions of kilograms of vessel weight)
Crude oil: 7.5
Oil (excluding crude and waste oils): 5.9
Wheat (including spelt) and meslin: 5.9
Sources: WISER, U.S. Census Bureau