U.S. Agriculture After Hurricane Katrina: Status and Issues

CRS Report for Congress
U.S. Agriculture After Hurricanes Katrina and Rita:
Status and Issues
Updated October 5, 2005
Randy Schnepf and Ralph M. Chite
Specialists in Agricultural Policy
Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

U.S. Agriculture After Hurricanes Katrina and Rita:
Status and Issues
On August 29, 2005, Hurricane Katrina struck the Gulf Coast region coming
ashore just east of New Orleans. On September 24, 2005, Hurricane Rita hit the Gulf
Coast region making land fall near the border of Texas and Louisiana. Both
hurricanes left behind widespread devastation. Rita appears to have done most of its
damage to energy infrastructure off-shore in contrast to Katrina which devastated
large swaths of Louisiana, Mississippi, and Alabama. This report examines the
impact of these hurricanes on three important factors affecting the U.S. agricultural
sector: marketing infrastructure based on the Mississippi River waterway and Gulf
ports; production losses for major crop and livestock producers in the affected region;
and potential consequences for agricultural production as a result of high energy
costs. It also discusses the federal government response to agricultural concerns.
Agricultural producers from the states directly impacted by Katrina have
suffered economic losses, although this varies greatly by crop and locality.
Preliminary estimates by USDA is that Hurricane Katrina contributed to $882 million
in total crop, livestock, and aquaculture losses. Those activities most affected were
aquaculture ($151 million), sugar cane ($50 million), and cotton ($40 million). The
damage estimate does not include losses in timber and nursery and greenhouse
products. No preliminary estimate has been released by USDA concerning
agricultural damage from Hurricane Rita.
Hurricane Katrina temporarily halted the flow of agricultural trade through New
Orleans — a major gateway for U.S. oil imports and agricultural exports — causing
commodity prices to decline in interior markets along the Mississippi River
waterway. Although partial recovery of marketing infrastructure occurred soon
following Katrina’s passage (with a brief shutdown in late September due to
Hurricane Rita), substantial congestion and high costs continue to plague the
Mississippi River grain transport network. This traffic bottleneck and its depressive
effect on farm commodity prices could persist into the spring of 2006.
Energy prices jumped substantially in early September 2005, as a significant
portion of U.S. petroleum and natural gas production, import, and refining facilities
were damaged and shut down. There is considerable uncertainty surrounding the
permanency of energy price rises and their potential impact on the U.S. economy in
general, and U.S. agriculture in particular. By raising the overall price structure of
production agriculture, sustained high energy prices could result in significantly
lower farm and rural incomes in 2006.
Certain ongoing federal programs, primarily crop insurance and disaster loans,
are available to eligible producers. The combination of Hurricanes Katrina and Rita
with a Midwestern drought might also cause Congress to consider supplemental crop
and livestock disaster assistance. This report is intended as an overview of how the
hurricanes have affected and are likely to continue to affect the agricultural sectors
of both the impacted regions and the United States. It is not intended to provide a
day-to-day update of events. It will, however, be updated as events warrant.

Agricultural Marketing Infrastructure Issues.............................1
Overview and Current Status.....................................1
Port of New Orleans............................................3
Timeline .................................................5
Barge-based Inland Waterway Transportation........................8
Overview of Barge Transportation............................8
Hurricane Damage to Barge Transportation.....................9
Commodity Prices.............................................9
Harvest-time Concerns.....................................10
Farm Production Losses............................................11
Damage to Forestry and Wood Products.......................13
Energy Costs and Agriculture.......................................14
Energy Prices Already Trending Higher, Jump After Katrina...........15
Government Response.............................................18
USDA Initiatives Targeting Export Traffic Congestion...............18
Current USDA Disaster Authorities and Programs...................18
Congressional Response.......................................19
List of Figures
Figure 1. Gulf Coast Paths of Hurricanes Katrina & Rita...................1
Figure 2. Most U.S. Inland Waterways are Centered on the Mississippi
River ........................................................2
Figure 3. Status of Major Gulf Ports as of Sept. 6, 2005....................4
Figure 4. Mississippi River-Gulf Export Grain Elevators..................7
Figure 5. Monthly Average U.S. Fuel Prices...........................15
Figure 6. Anhydrous Ammonia and Natural Gas Prices...................17
List of Tables
Table 1. Exports of Major Agricultural Commodities, U.S. Total versus
District of New Orleans, Average for 2002-2004.....................4
Table 2. Mississippi River-Gulf Elevator Location, Storage and Load
Capacity .....................................................7
Table 3. Barge Transport Moves Large Volumes Relative to Truck or Rail....8
Table 4. Harvest Period for Major U.S. Crops..........................10
Table 5. Top 5 Agricultural Commodities: Alabama, Louisiana, and
Mississippi, 2003.............................................13

U.S. Agriculture After Hurricanes Katrina
and Rita: Status and Issues
On August 29, 2005, Hurricane Katrina struck the Gulf Coast region coming
ashore just east of New Orleans near the Louisiana border with Mississippi. On
September 24, 2005, Hurricane Rita hit the Gulf Coast region making land fall near
the border of Texas and Louisiana. This report examines the impact of these
hurricanes on three important factors affecting the U.S. agricultural sector: marketing
infrastructure based on the Mississippi River waterway and Gulf ports; production
losses for major crop and livestock producers in the affected region; and potential
consequences for agricultural production as a result of high energy costs. It also
discusses the federal government response.
Figure 1. Gulf Coast Paths of Hurricanes Katrina & Rita

Agricultural Marketing Infrastructure Issues
Overview and Current Status
Hurricane Katrina damaged much of the nation’s grain marketing infrastructure
located in the New Orleans region including port facilities, river traffic infrastructure
(buoys, moorings, channels, etc.), and grain elevators, as well as those barges and
ships in the region at the time of landfall. Agricultural traffic on the Mississippi
River came to a temporary standstill. The sharp decline in barge availability shifted
transport demand to rail and truck systems that were already operating near capacity,
thus driving alternate transport prices higher and contributing to substantial

congestion within the Mississippi River grain transportation system centered on the
Mississippi River and its tributaries — the Missouri, Illinois, Ohio, and Arkansas
Rivers (Figure 2). Grain elevators within the Mississippi River inland waterway
system have reported disruptions in train service as rail cars were being diverted to
handle grain previously destined for barges according to the Kansas Grain and Feed
Association.1 Farmers’ transportation options also have been hurt by rising fuel
prices which have sharply increased the cost of moving grain by truck. Economists
are reporting the shortage of rail cars and storage space could last into 2006.2
Figure 2. Most U.S. Inland Waterways are Centered on the
Mississippi River

In a competitive market, the price that producers receive for their agricultural
commodities is derived from the price established in major markets such as Gulf port
export terminals, less the transportation and handling costs required to move grain
from the farm to those markets. When marketing costs rise — as they have in the
wake of Katrina — farm-gate prices usually fall and along with them so do farm and
rural incomes. This is exactly what has happened following Katrina’s damage to the
inland barge-based Mississippi River system. The news media reported sharp drops
in commodity prices in interior producing regions that depend on the Mississippi
River as an outlet for their surplus production.
When weather services and news media forecast a second hurricane — Rita —
approaching the central Gulf coast, authorities shut down those transport services that
were still operable or had already been restored. Fortunately, Hurricane Rita
dissipated in intensity prior to landfall and dealt only a glancing blow to most Gulf
1 U.S. Rail News, September 21, 2005, p. 140.
2 Ibid.

coast transport infrastructure. As a result, Mississippi River-based agricultural
transportation has again resumed its post-Katrina recovery; however, grain traffic
flows are still well below last year’s pace. Mississippi Gulf grain inspections during
each of the first two weeks of September were 81% and 79% below levels of a year
earlier.3 Gulf vessel loading activity was also significantly below levels of a year
Agricultural producers remain concerned about the rapid resumption of barge
traffic on the Mississippi in advance of the peak harvest-time period, about repair of
the marketing infrastructure, and about rising energy prices in part related to
hurricane damage. It is still unclear how much time will be required before barge and
ship traffic resumes its normal flow.
In mid-September, USDA announced that it was undertaking several activities
to alleviate the grain transport congestion. (See final section of this report,
Government Response, for more details on USDA’s response.)
Port of New Orleans
New Orleans is among the world’s busiest ports. It is served by 6 major
railroads, 50 ocean carriers, 16 barge lines, and over 75 motor carriers.4 More than

6,000 ocean vessels annually move through New Orleans on the Mississippi River.

The port of New Orleans and its surrounding Gulf ports are the primary outlet that
links a vast barge-based inland waterway system to international markets (Figure 2).
Every year a substantial share of the U.S. corn, soybean, and wheat crops are
trucked from farms in interior states to grain elevators located along the Mississippi
River and its major tributaries, then loaded onto barges for the trip down river to a
Gulf port facility where grain shipments are aggregated before being loaded onto
ocean-going vessels for the trip to foreign markets. The Port of New Orleans
reportedly handles 2 billion bushels of grain each year.5 Corn, soybeans, wheat, and
rice are the primary agricultural products exported via the Mississippi River. During
the 2002-2004 period, nearly 64% and 67% of U.S. corn and soybean exports (by
value), respectively, passed through Louisiana ports on their way to foreign markets.
In addition, about 23% of wheat and 41% of rice exports passed through the mouth
of the Mississippi during that same period (Table 1).
The Port of New Orleans provides a major destination for international
containers, rubber, steel, plywood and coffee, and is an important link to the inward
movement of fertilizers, fuel, and other vital farm inputs. The Port of New Orleans
is the nation’s top port for imported natural rubber. In addition, New Orleans is the
nation’s premier coffee-handling port, with 14 warehouses, more than 5.5 million

3 Grain Transport Report, USDA, Agricultural Marketing Service, Sept. 15, 2002.
4 “Hurricane Damage Necessitates Ship-Cargo Diversions,” Truckline Express, Sept. 7,


5 International Trade Reporter, “Cost to U.S. Farmers from Hurricane Katrina Could Run
to $500 Million in Lost Exports,” Vol. 22, No. 35, Sept. 8, 2005.

feet of storage space and six roasting facilities in a 20 mile radius. Two of the most
modern bulk processing operations are located in New Orleans: Dupuy Storage and
Forwarding Corp. (largest in the United States) and Silocaf of New Orleans, Inc. (the
world’s largest).6
Table 1. Exports of Major Agricultural Commodities, U.S. Total
versus District of New Orleans, Average for 2002-2004
District of District of
U.S. TotalNew OrleansNew Orleans,
Commodity($ Million)($ Million)% of U.S. Total
Total Exports744,97934,3295%
Agricultural Products57,954nana
Corn 5,412 3,608 64%
Soybeans 6,751 4,307 67%
Wheat 4,257 933 22%
na = not available.
Sources: U.S. Total from World Trade Atlas; District of New Orleans data are from U.S. Census
Bureau, Foreign Trade Division.
When Hurricane Katrina struck the Gulf Coast region, the storm brought a halt
to the flow of agricultural trade entering and exiting the United States through the
Mississippi River System centered on New Orleans and surrounding Mississippi-
River-based Gulf ports. Flooding and power outages stopped operations at most of
the port facilities within the affected region. Concerns for the United States’ ability
to export its surplus agricultural production were immediate.
Figure 3. Status of Major Gulf Ports as of Sept. 6, 2005.
In addition to affecting Mississippi River traffic and operations at the Port of
New Orleans, several other important central and eastern Gulf ports — Gulfport,
Biloxi, and Pascagoula, Mississippi; Mobile, Alabama; and Pensacola and Panama
City Florida — were completely or partially shut down due to hurricane damage
(Figure 3). However, a significant share of shipping activity was redistributed to
alternate western Gulf ports to facilitate the resumption of trade and economic
activity in the region. During the first week in September, most of the 86 ships that

6 The Port of New Orleans, [http://www.portno.com/facts.htm].

were reportedly queued at the Mississippi River’s entrance just prior to Katrina’s
arrival were diverted to ports in Texas and elsewhere to deliver their cargoes.7
Most export facilities did not sustain major structural damage; however, the
bigger problem was getting power restored, the channel cleared, and work crews back
into the region. The principal concerns regarding the Port of New Orleans were: first,
how quickly could the channel be reopened for river traffic, and second, how quickly
could port facilities for loading and unloading bulk grain resume operation? Within
two weeks both the Mississippi River channel and the Port of New Orleans were
engaged in commercial shipping, albeit at substantially reduced levels relative to the
pace of trade from a year earlier.
Timeline. Following is a brief timeline surrounding major events at the Port
of New Orleans.
August 29, 2005. Hurricane Katrina made landfall as a category 4 hurricane
just east of New Orleans temporarily closing all transportation and shipping activities
between the Gulf of Mexico and the Mississippi River. An estimated 400 barges (out
of over 11,000 barges that ply the Mississippi River) were destroyed or damaged. Of
the ten major grain elevators located within the New Orleans region, only one —
Myrtle Grove — sustained any substantial damage.
August 31, 2005. The U.S. Coast Guard re-opened the Mississippi River to
tug and barge navigation. Ocean vessels were still barred pending Coast Guard
investigation of the status of channel depths and navigation aids. The U.S. Coast
Guard reported that about 70% of the navigation aids (such as buoys marking the
river channel) along the Mississippi River were damaged or missing.8 The river
channel itself had to be surveyed to guard against possible shoals or other
obstructions that might have been left in the hurricane’s wake. In the early period
following the hurricane, the U.S. Coast Guard focused its full resources on search
and rescue operations in the areas affected by the hurricane.
September 4, 2005. The communications manager for the Port of New
Orleans announced that the Mississippi River was open in one direction to ships with
a draft of 35 feet during daylight hours. That same day, the Port President and CEO,
Gary LaGrange announced that the Port of New Orleans’ river front terminals had
survived Hurricane Katrina in relatively good shape and, although slightly damaged,9
they would be workable once electrical power and manpower were available.
Although the channel was usable, most of the port facilities were to be dedicated to
military relief vessels through mid-September. Commercial vessels would not be
allowed to return to the Port of New Orleans until electrical power and manpower
were re-established. The U.S. Dept. of Transportation’s Maritime Administration

7 New York Times, “Ad-Libbing Many Routes, Ships Return to Mississippi,” Sept. 7, 2005.
8 New York Times, “Ad-Libbing Many Routes, Ships Return to Mississippi,” Sept. 7, 2005.
9 Seaports Industry Update, September 5, 2005, “Special Announcement,” available online
at [http://www.aapa-ports.org/pressroom/katrina_updates.htm].

announced that it was providing several ships to the Port of New Orleans with the
capacity to temporarily house 1,000 people who will operate the port.
September 7, 2005. Secretary of Agriculture Mike Johanns reported that
substantial existing infrastructure was available on the Mississippi River in the New
Orleans area for facilitating port activities.10 In particular, he mentioned three
floating rigs with a loading capability of 30,000 to 60,000 bushels per hour from river
barges directly on to ocean-going vessels or barges, and 10 export elevators with a
storage capacity of 526 million bushels and a loading capability of 970,000 bushels
per hour when fully operational (Figure 4 and Table 2). Secretary Johanns estimated
that (as of September 7, 2005) the operational capacity of the 3 rigs and 10 elevators
was a combined 63% of normal and that slower barge movements and limited staff
prevented full utilization of their loading capacity.
Gradually the U.S. Coast Guard began to shift its operational focus from search
and rescue to the process of damage assessment and repair of the navigation
September 21, 2005. The U.S. Army Corps of Engineers (USACE) reported
in its weekly navigation update, that all of the ports listed as closed or opened with
restrictions in Figure 3 were now fully open to daylight traffic with Gulf Port,11
Mobile, and Panama City open to 24-hour transit.
September 22, 2005. Most major ports located along the Texas and
Louisiana Gulf coast were temporarily closed in advance of Hurricane Rita.
September 24, 2005. Hurricane Rita makes landfall as a category 3
hurricane at the Texas-Louisiana border near the Sabine-Neches Waterway (Port
Arthur and Port of Beaumont) and Calcasieu Lock and River System connecting
Lake Charles with the Gulf of Mexico. Preliminary reports suggest that export grain
elevators located along the Texas Gulf coast sustained only minimal physical damage
from Hurricane Rita.12 Resumption of operations hinged on how quickly power was
restored and personnel were allowed to return to the region following a mandatory
September 27, 2005. Myrtle Grove grain elevator, the last of the 10 grain
elevators in the New Orleans region, was fully restored for operations.
September 29, 3005. The USACE lifted all remaining restrictions on the
Lower Mississippi River through the Southwest Passage (the principal channel out

10 USDA news release, “Mississippi River Export Grain Industry Recovering from
Hurricane Katrina,” Sept. 7, 2005.
11 “Hurricane Katrina: Navigation Update,” U.S. Army Corps of Engineers, Sept. 21, 2005;
available at [http://www.hq.usace.army.mil/cepa/katrina/navigation.html].
12 “Texas Grain Terminals Escape Rita’s Fury,” Wheat Letter, U.S. Wheat Associates,
Sept. 29, 2005.

of the Mississippi River system to the Gulf). The Southwest Passage was now open
for both day and nighttime traffic.
Figure 4. Mississippi River-Gulf Export Grain Elevators

Table 2. Mississippi River-Gulf Elevator Location, Storage and
Load Capacity
MapStorage CapacityLoad Capacity
reference #Location(million bushels)(bushels/hour)
1Myrtle Grove6.590,000
2 Westwego 4.3 100,000
4 Destrehan 6.2 80,000
5 Destrehan 6.3 80,000
6DestrehanFloating Rig30,000
7 Reserve 3.6 80,000
8 Reserve 7.7 100,000
9Saint Elmo2.060,000
10ConventFloating Rig60,000
11 Convent 4.0 120,000
12DarrowFloating Rig30,000
13Baton Rouge7.060,000
T otal 52.6 970,000
Source: USDA, Agricultural Marketing Service (AMS) materials provided in briefing to staff of
House Committee on Agriculture, September 22, 2005.

October 2, 2005. All major Texas Gulf ports were open to vessels with
restricted depths of 40 to 45 feet at most harbor channels.13 The Calcasieu River to
Lake Charles remained restricted to shallow draft tows and light tug traffic, but with

24-hour allowance. Deep draft vessels were restricted to 35 feet in daylight hours.

Barge-based Inland Waterway Transportation
Overview of Barge Transportation. Barge transportation represents the
lowest-cost transport mode for moving a high volume of bulk commodities long
distances (Table 3). Because barge rates are generally significantly lower than either
rail or truck, the Mississippi River navigation system provides considerable
transportation cost savings to the regional and national economy.14 Most economists
and market analysts agree that inexpensive barge transportation helps check rates
charged by the rail and truck transportation industries. In addition, low internal
transport costs relative to export competitors such as Argentina and Brazil have
helped U.S. products compete in international corn and soybean markets.15
Table 3. Barge Transport Moves Large Volumes
Relative to Truck or Rail
Capac i t y c Truck
Type of TransportEquivalents
BushelsMetric tons
Truck (large semi)910261
Jumbo Hopper Car3,5001004
Ba r ge a 52,000 1,500 58
100-car unit train350,00010,000385
15-barge tow787,50022,500865
Panamax vesselb2,362,07460,0002596
Source: U.S. Tugboat & Towboat Industry.
a. Assumes a 9-foot channel as is maintained on the Upper Mississippi River by the U.S. Army Corps
of Engineers. Barge capacity increases with channel depth.
b. Panamax vessels are restricted to 60,000 metric tons due to maximum draft requirements.
c. Bushels are corn-equivalent (1 metric ton = 39.3679 bushels).
A complex web of local supply and demand conditions determines how and
when grain moves through the U.S. grain-handling network comprised of on-farm

13 “Hurricane Katrina: Navigation Update,” U.S. Army Corps of Engineers, Oct. 2, 2005;
available at [http://www.hq.usace.army.mil/cepa/katrina/navigation.html].
14 For a discussion of agricultural transportation issues and the cost advantages of barge
versus truck or rail, see CRS Report RL32470, Upper Mississippi River-Illinois Waterway
Navigation Expansion: An Agricultural Transportation and Environmental Context, by
Randy Schnepf, Coordinator.
15 Randall D. Schnepf, Erik N. Dohlman, and Christine Bolling, Agriculture in Brazil and
Argentina: Developments and Prospects for Major Field Crops, USDA, Economic Research
Service, Agriculture and Trade Report No. WRS013, (Washington: Dec. 2001), pp. 53-60.

storage, trucks, railroads, barges, and grain elevators (including county, sub-terminal,
and export elevators). Price changes at any point along the chain can result in shifts
to alternate transport modes or routes as grain marketers search for the lowest-cost
method of moving grain between buyer and seller.
A hurricane such as Katrina or any similar weather or catastrophic event that
dramatically slows or severely limits barge traffic will usually have the effect of
raising barge freight rates as the demand for barge services exceeds their supply.
Higher barge freight rates for corn and soybeans will in turn shift these commodities
to alternate uses (feed, food, industrial, or storage), to alternate transport modes (rail
or truck), or to alternate trade routes (e.g., to the Atlantic via the St. Lawrence
Seaway, or overland to Canada, Mexico, or alternate ports along the Gulf coast or as
far away as the Pacific Northwest). The degree of shifting depends, in part, on the
perceived permanency of the price change. Because truck and rail are significantly
more costly than barge transport, shifting bulk commodities to truck- or rail-based
routes can substantially raise the cost of moving grain.
Hurricane Damage to Barge Transportation. When Hurricane Katrina
struck the Gulf coast region, an estimated 400 barges (out of over 11,000 barges that
ply the Mississippi River) were destroyed or damaged, and a substantial number of
barges and vessels in the area surrounding New Orleans were displaced. Although
this physical damage was costly, it is not the major factor limiting the quick reprise
of barge transportation.
The primary problem for barge-based agricultural transportation on the
Mississippi River system is the problem of restoring the entire transportation system
encompassing trains, trucks, barges, ports, and ocean-going boats to a synchronized
schedule of deliveries and arrivals. As of September 30, 2005, the entire
transportation network remained somewhat out of sync. Waterways and rail lines are
backed up and congested with barges and trains arriving to deliver their goods to
boats that are berthed in port slots awaiting delivery for goods other than those being
In addition to an “out-of-sync” transportation network, approximately 140
barges containing hurricane-damaged corn (primarily water damage) were left in the
New Orleans region. These barges needed to be off-loaded and the barges moved
back up-river to elevators eagerly awaiting barge transport to ship their grain down
river. However, because of the water damage, the corn was no longer acceptable for
contract delivery and could not be off-loaded at any of the export-servicing grain
elevators in the New Orleans vicinity. Because of the poor condition of their cargo,
these barges must be towed to special locations (primarily back up river) for off-
loading and removal before they can re-enter the normal barge traffic.
Commodity Prices
The immediate effect of the slowdown of barge traffic on the Mississippi River
was a reported sharp decline in grain elevator bid prices for corn and soybeans in
interior grain markets. Many grain elevators serving barge traffic were already near
their maximum storage capacity, and felt compelled to reduce their bid prices to
avoid buying grain that they could not store. The problem has been made more acute

by the approaching harvest when producers will likely need all of their on-farm
storage capacity to store their new crop harvests. As a result, many producers have
been looking to sell the remaining supplies from last year’s harvest to clear space.
It is expected that this situation will be remedied and elevator bids will
strengthen when barge traffic returns to more normal levels. However, USDA
officials have expressed concern that the price decline resulting from the temporary
delay in the Mississippi barge-based export flow of agricultural products could
persist for at least three months and possibly into the spring depending on several
factors including how quickly barge traffic resumes; how early the winter freeze and
shut-down of the upper Mississippi River occurs; and whether the low water levels
of the Missouri and Upper Mississippi Rivers are replenished by rainfall.
Harvest-time Concerns. Harvest time generally signals the busiest period
of export movement for agricultural products for several reasons. First, supplies are
generally most abundant at harvest time and can often exceed on-farm or local
storage capacity. As a result, both producers and marketers are eager to move surplus
production through the marketing channels. Second, the more northerly inland
waterways — the Upper Mississippi River waterway and the St. Lawrence Seaway
— shut down during the winter months due to freezing conditions. This limits
export opportunities and increases the urgency for moving excess production into
marketing channels ahead of the winter. Third, the arrival of surplus agricultural
production into marketing channels at harvest time tends to pressure commodity
market prices to their season lows and frequently offers the best purchasing
opportunities for foreign buyers.
Table 4. Harvest Period for Major U.S. Crops
CropMajor U.S.Growing ZoneSouthern-TierStatesCentral-Tier StatesNorthern-Tier States
Winter WheatJune-JulyMay-JuneJuly —
Spring WheatAug-Sept — JulyAug-Sept
Cor n Oc t -Nov S e p t -Oc t Oc t Oc t -Nov
Soybeans Oct-Nov Sept-Oct Oc t Oct-Nov
Source: Major World Crop Areas and Climatic Profiles, Agr Handbook No. 664, World Agricultural
Outlook Board and Joint Agricultural Weather Facility, USDA, Sept. 1994.
USDA has initiated several activities designed to alleviate weak commodity
prices by easing the grain transport congestion that has raised transport costs and
lowered farm prices. (See the final section of this report, Government Response, for
details of USDA’s activities.)

Farm Production Losses
From a national perspective, the region’s agriculture is dominated by
Louisiana’s sugar cane crop which accounts for nearly one-third of the value of U.S.
annual sugar cane production (Table 5). Poultry in Alabama and Mississippi, rice
in Louisiana, and cotton in Mississippi also have national significance. However,
several crops play a much bigger role at the state level. Broilers and eggs accounted
for over 62% of Alabama’s agricultural output value in 2003, while broilers
represented a 42% share of Mississippi’s agricultural economy. Cotton’s share of
state agricultural output value in 2003 was 15% in Mississippi, 12% in Louisiana,
and 5% in Alabama.
Preliminary estimates by USDA economists are that Hurricane Katrina
contributed to $882 million in total crop, livestock, and aquaculture16 losses in the
Southeast.17 (Estimates for Hurricane Rita are not yet available, but are expected to
be significantly less than for Katrina.) USDA reports that the greatest agricultural
losses caused by Katrina, in terms of value of production, were to aquaculture ($151
million), sugarcane ($50 million), and cotton ($40 million). Other crops such as
soybeans and rice were also prone to some wind damage. The $882 million loss
estimate does not include Gulf state losses of timber (which USDA says could be in
the billions of dollars depending on its salvage value — see the following section for
more details), or losses of nursery and greenhouse products and facilities in Florida,
for which a Florida trade association projects $370 million in structural damage and
plant losses.18 Also, the loss of electricity, the shortage of fuel, and infrastructure
damage temporarily interrupted the flow of poultry, milk and other agricultural
products to markets.
For some crops, particularly sugarcane, the extent of losses will not be known
until harvest. Damage to the region’s sugarcane crop initially appeared to be
extensive because the high winds flattened the crop. Some analysts report that much
of the crop that was downed by the storm was not destroyed and can still be
harvested. USDA estimates that Louisiana’s sugarcane production will be 9% below
pre-hurricane estimates, which translates into an estimated processed value loss of
$50 million. Katrina also caused two Louisiana sugar refineries to temporarily halt
operations, which exacerbated what was already a tight supply of sugar. In response,
USDA increased available sugar supplies by increasing the quantity of domestic
sugar that may enter the market under the sugar price support program.19

16 Aquaculture is defined as farm-raised fish and seafood. For more on aquaculture losses,
see CRS Report RS22241, Hurricanes Katrina and Rita: Fishing and Aquaculture
Industries — Damage and Recovery, by Eugene H. Buck.
17 All USDA estimates referenced in this section of the report are from “A Preliminary
Assessment of the Effects of Katrina and Drought on U.S. Agriculture,” USDA/Office of
Chief Economist , September 19, 2005 at [http://www.usda.gov/oce/Katrinadamage_1_2.
18 [http://www.fngla.org/articles/viewArticle.asp?articleID=504].
19 [http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1RD?printable=true&contentido

According to USDA, the largest cotton production areas (east and west of the
storm track) were spared significant crop losses. Mississippi and Alabama, which
account for 10% and 3% of expected U.S. cotton production, respectively,
experienced some damage. Cotton production is estimated by USDA to be down
2.4% in Alabama and 4.3% in Mississippi following Hurricane Katrina. Total cotton
losses in the Gulf region are expected to be about $40 million. Some of the damage
to the crop might be quality losses rather than production losses. Similarly, minor rice
losses were experienced, since the storm track was east of the major rice growing
areas and most of the Louisiana rice acreage already had been harvested before
Katrina struck.
The corn and soybean crops were also affected by the hurricane, but the region
normally accounts for less than 3% of national production of these two crops. The
most serious market effects attributable to corn and soybeans are more transportation
related (as discussed above). According to USDA, estimated regional losses are $14
million for corn and $17 million for soybeans.
Industry analysts also report that the Gulf region’s dairy industry experienced
production and processing losses. USDA reports that 60,000 dairy cows were
located in counties that experienced hurricane-strength winds. Some of these cows
were lost, but no estimates are available. The region’s dairy industry was hampered
by the loss of production caused by power outages in milking facilities, and the
inability to transport milk because of damaged roads and bridges, as well as the loss
of refrigeration and metropolitan retail dairy markets. Alabama, Louisiana, and
Mississippi combined account for less than 1% of U.S. milk production; hence,
market effects are expected to be limited to the region.
USDA also reports losses to cattle operations and broiler production in the
three-state region. The region accounts for about 4% of national beef production, so
national market effects are expected to be minimal. Poultry is a significant enterprise
in the region: Alabama and Mississippi rank third and fifth, respectively, among all
states in broiler production. Most of the broiler losses were concentrated in
Mississippi where facilities were either damaged or without power for an extended
period. According to USDA, an estimated 6 million chickens were killed and 2,400
poultry barns were damaged in Mississippi alone, and another 200,000 chickens were
lost in Alabama. The broiler losses are valued by USDA at approximately $15
million. Some analysts estimate that large area broiler losses could cause an increase
in market broiler prices in the short term (1-2 months). However, increased
production elsewhere would eventually fill the gap so that market effects would be
minimized by the end of the year.20

19 (...continued)
nly=true&c ontentid=2005/08/0338.xml].
20 Global Insight’s Agri-View, September 8, 2005.

Table 5. Top 5 Agricultural Commodities:
Alabama, Louisiana, and Mississippi, 2003
Share of
State’s TotalShare of
Total CashFarmU.S. Farm
Receipts Receipts Val u e
($ Millions)(as %)(as %)
1. Broilers1,837.753.812.1
2. Cattle and Calves425.212.50.9
3. Chicken Eggs295.78.75.6
4. Greenhouse & Nursery256.97.51.7
5. Cotton160.54.73.2
All Alabama Farm Commodities3,415.31.6
1. Sugar cane329.216.532.8
2. Cotton238.011.94.7
3. Cattle and calves178.38.90.4
4. Rice165.68.313.6
5. Soybeans163.48.21
All Louisiana Farm Commodities1,993.40.9
1. Broilers1,424.141.89.4
2. Cotton517.415.210.3
3. Soybeans309.49.11.9
4. Aquaculture244.77.231.3
5. Cattle and Calves208.16.10.5
All Mississippi Farm Commodities3,411.01.6
Source: U.S. Department of Agriculture’s Economic Research Service.
Damage to Forestry and Wood Products. The Gulf Coast states are
significantly forested and are major producers of lumber and plywood. Information
on the effects of Hurricane Katrina on Gulf Coast forests is sketchy. The Mississippi
Forestry Commission issued a news release estimating that 1.3 million acres of forest
land in the state had been damaged, with commercial timber valued at about $1.3
billion; urban tree damage in Mississippi was estimated at $1.1 billion.21 The USDA
Forest Service estimated 19 billion board feet of timber damaged on over 5 million

21 Available at [http://www.mfc.state.ms.us/pdf/katrina/timberdamage.pdf], visited on Sept.

15, 2005.

acres in Mississippi, Alabama, and Louisiana.22 In addition to the damages to
wildlife habitat and other environmental services from the loss of forest cover, the
dead and damaged trees can become hazardous fuels for wildfires as well as a haven
for forest insects and diseases.
Forestry assistance programs exist to help landowners, and can be used to help
in the recovery of forest lands. One particular program, Emergency Reforestation
Assistance, was enacted in the 1990 farm bill (P.L. 101-624) to assist private
landowners, primarily in South Carolina, with reforestation following Hurricane
Hugo that hit in 1989. The program has not been funded since FY1993, following
Hurricanes Andrew (FL and LA) and Iniki (HI).23 Other forestry assistance programs
are generally available to help landowners and states with forestry activities and
forest protection, such as reducing wildfire and insect threats from trees damaged by
the hurricane.
The impact of the hurricanes on wood products is less certain. Damages to
structures has prompted an urgent demand for plywood, for temporary repairs; if
plywood prices follow the pattern that ensued from Hurricane Andrew in 1993, prices
might have peaked at about the time of the event in anticipation of the damage, and
will fall back to more normal levels within a few weeks. Longer-term impacts are
less clear. Rebuilding will increase the demand for additional wood products,
although demand depends greatly on interest rates. The dead and damaged trees
might provide a significant boost to wood product supplies, as salvage and mill
operations convert the trees to usable products. However, salvage operations are
hampered by the increasingly fragmented ownership of forest land and by rising fuel
costs, and some mills may have been damaged by the hurricane. The effect over the
coming weeks and months is thus likely to be both greater wood products demand
and greater wood products supply, and the net effect on wood product prices (after
the current urgent demand for plywood has passed) is indeterminate.
Energy Costs and Agriculture
Following the damage inflicted by Hurricanes Katrina and Rita on the Gulf
region’s oil and natural gas production, refining, and importing capability, energy24
prices — gasoline, diesel fuel, and natural gas — rose sharply. Considerable
uncertainty surrounds the longevity of recent energy price rises, and the implications
for U.S. agriculture hinge on their permanency. Fuel prices have been trending

22 U.S. Dept. of Agriculture, USDA Forest Service Reports Significant Damage by
Hurricane Katrina to Public and Private Timberland, USDA News Release No. 0376.05,
available on Sept. 16, 2005, at [http://www.usda.gov/wps/portal/!ut/p/s.7_0_A/7_0_1RD?
printable=true& contentidonly=true &contentid=2005/09/0376.xml].
23 See “Emergency Reforestation Assistance” in CRS Report RL31065, Forestry Assistance
Programs, by Ross W. Gorte.
24 For a discussion of energy supply issues See CRS Report RS22233, Oil and Gas: Supply
Issues After Katrina. For information on energy prices see the U.S. Dept of Energy’s
Energy Information Administration’s website at [http://www.eia.doe.gov/].

higher over each of the past three years, and farmers were already likely to see record
high fuel costs before the post-Katrina runup in prices struck (Figure 5). In the near-
term, it is likely that such strong energy price rises will significantly increase
energy’s share of total production expenses and could significantly alter the farm
income outlook for affected farm households and rural economies.
Figure 5. Monthly Average U.S. Fuel Prices

Energy Prices Already Trending Higher, Jump After Katrina
The national average annual retail price for No. 2 diesel fuel has been rising
steadily from $1.32 per gallon in 2002 to $1.51 per gallon in 2003, and $1.81 per
gallon in 2004. In August 2005, it hit a then-record $2.50 per gallon. Gasoline
prices followed a very similar pattern. In September 2005, post-Katrina concerns
have spiked both gasoline and diesel prices to record monthly average levels at $3.04
and $2.82 per gallon, respectively.
Natural gas prices also have experienced substantial demand-driven price rises
over the past 3½ years. After hovering just below $2.00 per 1,000 cubic feet (mcf)
through most of the 1990s, natural gas (wholesale or wellhead) prices moved
upwards to average $2.95 per mcf in 2002, then surged to a $4.98 per mcf average
in 2003. Wellhead prices continued rising in 2004, averaging $5.49 per mcf. Since
April 2005, natural gas prices have been above $6.00. During the final week of
August (August 24-31), Henry Hub spot market prices (Henry Hub is a primary
wholesale market location for natural gas) sky rocketed in anticipation of Katrina’s
disruption to an average of $12.70 per mcf. During September, after Katrina had
moved through the Gulf Coast region and analysts had a chance to better assess the

damage to production facilities, natural gas prices retreated to average around $11 per
Natural gas spot prices spiked again, jumping to over $14 per mcf in advance
of the arrival of Hurricane Rita. However, natural gas prices declined following
Hurricane Rita’s actual landfall as a weaker hurricane than expected, even while
causing massive evacuations of rigs and platforms in the Gulf of Mexico and
inflicting damage to both offshore and onshore energy-related infrastructure. As of
September 28, price quotes were still unavailable at the Henry Hub, which was shut
down owing to Hurricane Rita.25 However, trading at other market locations in
Louisiana saw an average decrease of $1.35 per MMBtu on the week
(Wednesday-Wednesday, September 21-28). The average price among Louisiana
trading locations on September 28, 2005, was $13.45 per mcf.
Evaluating the potential effect of such volatile energy price movements on U.S.
agriculture hinges greatly on their permanency.26 The relative importance of energy
costs as a share of total agricultural production expenses varies greatly by both
activity and region. Although there are many kinds of operations performed by the
different farm types, nearly all mechanized field work, as well as marketing and
management activities involve machinery, trucks, and cars that are dependent on
petroleum fuels. Dryers and irrigation equipment are often more versatile in that they
can be powered by petroleum fuels, natural gas, or electricity, while electricity is the
primary source of power for lighting, heating, and cooling in homes, barns, and other
farm buildings. Some activities such as dairy and poultry production, that require a
constant supply of energy for refrigeration or cooling are particularly vulnerable to
a cut-off of energy supply as evidenced by the damage sustained in the hurricane-
affected region.
In the immediate term, higher diesel fuel and gasoline prices will raise the cost
of harvesting and post-harvest treatment (e.g., drying, moving, and storing) of crops
still in the field. For those farms that have been indirectly impacted by Katrina’s
damage to the region’s marketing infrastructure, higher fuel prices will make the
overall cost of marketing products more expensive, while making rail and truck more
costly options relative to barge transport. Such higher marketing costs inevitably
result in a widening farm-to-market basis and lower prices received at the farm gate.
This, in turn, will alter the farm income outlook for affected farm households and
rural economies.
In the longer term, sustained high energy prices through the winter could lead
to significant regional shifts in agricultural activities as early as 2006. High natural
gas prices are particularly troublesome because of their relationship with nitrogenous
fertilizer production. Natural gas accounts for a substantial portion (75% to 90%) of
nitrogen fertilizer production costs, either directly as a feedstock or indirectly as a
fuel to generate the electricity needed in production. Because U.S. fertilizer
manufacturers are at a competitive disadvantage with foreign producers when U.S.

25 Natural Gas Weekly Update: Overview, DOE, EIA, Sept. 29, 2005.
26 For a broad discussion of energy use and U.S. agriculture see CRS Report RL32677,
Energy Use in Agriculture: Background and Issues, by Randy Schnepf.

natural gas prices rise, the high prices of recent years have contributed to a
substantial reduction in its U.S. nitrogen fertilizer production capacity — over a 25%
decline since 1999. In addition, higher natural gas prices have contributed to
significantly higher nitrogen fertilizer prices (Figure 6).
Figure 6. Anhydrous Ammonia and Natural Gas Prices

The post-Katrina jump in U.S. natural gas prices casts a cloud of uncertainty
over the future of the U.S. nitrogen fertilizer industry as well as raising concerns
about the potential supply and price of nitrogen fertilizer for crops in 2006.
Producers are undoubtedly eyeing fuel and fertilizer price developments and will
consider shifting away from crops that rely heavily on fuel-dependent field work or
fertilizer applications and towards those crops and activities that are less energy
dependent. Corn is perhaps the most vulnerable crop due to its high per-acre energy
usage rates.27
In the longer term, a sustained rise in energy prices may have serious
consequences on energy-intensive industries like agriculture by reducing profitability
and driving resources away from the sector.
27 For more information on energy use variations by region and crop, see CRS Report
RL32677, Energy Use in Agriculture: Background and Issues, by Randy Schnepf.

Government Response
USDA Initiatives Targeting Export Traffic Congestion
During September 2005, USDA announced that it was initiating several
activities to help alleviate the grain transport congestion described below. On
September 7, 2005, USDA announced changes to its Marketing Assistance Loan
Program to help alleviate the urgency of marketing grain at distress-level prices.28
USDA’s Commodity Credit Corporation (CCC) is implementing changes to allow
producers to obtain loans for “on-farm” storage on grain stored on the ground in
addition to grain bins and other normally approved structures. This action was
designed to alleviate short-term logistical problems and support local cash prices
above the distressed levels that have resulted from the slowdown of barge traffic on
the Mississippi River.
On September 20, 2005, Secretary of Agriculture, Mike Johanns, announced
that USDA was taking four additional steps to alleviate the grain transport
congestion.29 First, USDA, acting through the CCC, was providing temporary
incentives to facilitate the immediate movement of 140 barges of damaged corn
(over 7 million bushels) from New Orleans to up-river locations for off-loading.
Once unloaded, the barges can return to duty moving new-crop commodities.
Second, USDA was providing incentives for alternative grain storage.30 Under this
activity, the CCC would provide special, one-time assistance to operators to help
with the costs associated with storing corn and wheat in alternative storage facilities.
Up to 50 million bushels of corn or wheat could be eligible for this activity. Third,
USDA was encouraging alternative shipping patterns through regions other than the
central Gulf by providing for a transportation differential incentive on the movement
of up to 200,000 metric tons of corn, wheat or soybeans. Fourth, for those producers
with farm-stored commodities under loan to USDA whose loans mature at the end
of September and October and who would otherwise forfeit those commodities to
USDA, USDA would allow such producers to buy back the grain at the posted
county price. Normally, these producers would be required to move the forfeited
grain to commercial warehouses. This offer is being made on a state-by-state basis.
Current USDA Disaster Authorities and Programs
USDA has at its disposal three major ongoing programs designed to help crop
producers recover from the financial effects of any natural disaster:
!federal crop insurance,

28 “USDA Offers Emergency Relief Programs for Farmers and Ranchers Coping with
Hurricane Katrina Disaster,” USDA News Release No. 0355.05, Sept. 7, 2005.
29 “USDA Takes Action to Ease Grain Transportation,” USDA News Release No. 0389.05,
Sept. 20, 2005.
30 USDA, Commodity Credit Corporation, “Request for Proposals: Billing Code 3410-05-P.”
[ h t t p : / / www. f s a . usda.gov/pas/absolutenm/ articlefiles/453-KatrinaT ransSt o r e In c e n t i ve s N

!non-insured assistance program (NAP) payments, and
!emergency disaster loans.
All three of these programs have permanent authorization and available funding.
For background information on these and other farm disaster programs, see CRS
Report RS21212, Agricultural Disaster Assistance, by Ralph M. Chite.
For the 2005 crop year, Alabama, Mississippi, and Louisiana crop producers
purchased just over $1 billion in crop insurance coverage, with nearly 70% of the
value of coverage being for cotton, soybeans, and rice. According to preliminary
reports from USDA, the three-state region has relatively high participation rates in
the crop insurance program. However, much of that coverage is at the catastrophic
level, which provides an indemnity payment only on losses in excess of 50% of
normal production. For example, 90 to 95 percent of the cotton acreage in the three
Gulf states is enrolled in the federal crop insurance program. However, in Louisiana
and Mississippi, just over one-half of that acreage is enrolled only at the catastrophic
level. For those producers who grow a crop that is not eligible for crop insurance
coverage, USDA makes NAP payments available for catastrophic losses, as long as
the producer signed up for coverage and paid an administrative fee in advance.
Agricultural producers in a county that has been declared a disaster area may be
eligible for low-interest emergency disaster (EM) loans available through USDA’s
Farm Service Agency. USDA currently has authority to provide just over $150
million in EM loans. An eligible producer must be a family-sized farmer who
suffered a minimum crop loss of 30%, and is unable to qualify for a loan from a
commercial lender. EM loan funds may be used to help eligible farmers, ranchers,
and aquaculture producers recover from production losses (when the producer suffers
a significant loss of an annual crop) or from physical losses (such as repairing or
replacing damaged or destroyed structures or equipment, or for the replanting of
permanent crops such as orchards). A qualified applicant can then borrow up to

100% of actual production or physical losses (not to exceed $500,000) at a below-

market interest rate.
USDA announced on September 8, 2005, that $20 million in Emergency
Conservation Program funding will be given to Louisiana ($12.45 million),
Mississippi ($7.1 million), Alabama ($855,0000) and Tennessee ($25,000) to help
these states clean up debris, and restore fences and conservation structures. Eligible
participants can receive cost-share assistance of up to 75% of the cost to implement
these practices.
Congressional Response
Since 1988, Congress frequently has supplemented the regularly funded disaster
assistance programs with additional emergency aid. Funding for these programs
generally are provided in emergency supplemental appropriations bills. Among
these major ad-hoc farm disaster programs are (1) direct disaster payments, (2)
livestock assistance, (3) tree assistance, and (4) emergency conservation assistance.
Most recently, the FY2005 Military Construction Appropriations Act (P.L. 108-324)
contained supplemental funding to provide an estimated $3.5 billion in assistance for

2003 and 2004 crop, livestock, and tree losses, primarily in response to ongoing

drought in the West and a series of 2004 hurricanes that damaged or destroyed
agricultural production in the Southeast. (For more information on the ad-hoc
agricultural assistance that was provided in response to the 2004 hurricanes, see CRS
Report RS21212, Agricultural Disaster Assistance.)
Prior to Hurricanes Katrina and Rita, portions of the Midwest were
experiencing significant 2005 crop losses caused by a prolonged drought. The
combination of the Midwest drought and losses caused by the two hurricanes is
expected to provide momentum for Congress to consider emergency crop and
livestock assistance for 2005 production losses some time this year. Several bills
have been introduced in the 109th Congress that would provide supplemental
agricultural assistance, primarily in the form of crop disaster payments and livestock
assistance. To date, these include bills (H.R. 3809, H.R. 3754/S. 1692, H.R. 3702,
S. 1636) that would provide disaster assistance to all regions of the country that meet
certain loss requirements, using similar payment formulas as in past years. Other
bills (H.R. 3958 and S. 1766) have been introduced that include agricultural
assistance as a part of a much larger package of assistance for recovery and relief
from the effects of Hurricane Katrina in Louisiana.
Congressional leadership has not yet determined the specifics of any agricultural
disaster assistance package, or what legislative vehicle might be used to authorize
this assistance.31 The most likely vehicle for agricultural assistance is in the context
of a third supplemental appropriations bill for Hurricane Katrina recovery, which
many expect will provide billions of dollars of assistance for rebuilding the
infrastructure of the affected region. Other possibilities include agricultural assistance
being attached to the pending FY2006 agriculture appropriations bill (H.R. 2744)
which is currently in conference committee, or the agriculture committees potentially
could report emergency agricultural legislation to the floor for consideration.

31 Congress has provided a total of $62.3 billion in two emergency supplemental acts
(P.L.109-61 and P.L.109-62) for Hurricane Katrina assistance. Most of the funds were
appropriated to the Federal Emergency Management Assistance (FEMA) for recovery and
relief operations. To date, no emergency funds have been appropriated to USDA programs.