Dual Hurricanes Blew in Big Problems for Agribusiness in Louisiana,Texas

By | October 17, 2005

In addition to the immense destruction in heavily populated urban centers and coastal communities caused by Hurricanes Katrina and Rita, which hit the Gulf Coast region in August and September 2005, agricultural interests in the affected states also suffered massive da-mage. Virtually all agribusiness sectors, from for-estry to poultry production, were badly impaired by the two storms.

According the Louisiana State University AgCenter, no coastal parishes in Louisiana were left unscathed by Hur-ricane Rita, which blew ashore along the Texas/Louisiana border Sept. 24, less than a month after Hurricane Katrina hit Southeast Louisiana and South-west Mississippi.

Damages from Katrina to agriculture in Louisiana had been estimated at more than $1 billion; Hurricane Rita added more than $500 million in losses, raising the estimate of agriculture losses in the state as a result of the two hurricanes to more than $1.5 billion.

By early October, the Texas Department of Agriculture had not yet released specific dollar amounts relating to agricultural damages from Rita, but the agency said losses occurred to livestock operations, including poultry; poultry houses; barns; fencing; timber; timber mills; Christmas trees; feed and hay; farm equipment; and some crops, such as rice and soybeans. The Texas Agricultural Statistics Service reported power outages and damage from fallen trees caused heavy death losses for poultry producers.

Hurricane Rita’s high winds took a massive toll on the timber industries in both Louisiana and Texas. According to the Texas Forest Service, the total volume of timber damaged and affected by Hurricane Rita was estimated to be 967 million cubic feet–or 771,000 acres–worth about $833 million. The Forestry Service noted that East Texas contains almost 16 billion cubic feet of growing stock timber in 43 counties. Total volume damaged and affected by Hurricane Rita was about 6 percent of that.

The Texas Forest Service explained that damaged trees are those that are uprooted, snapped off, leaning more than 45 degrees, or otherwise are likely to die within 12 months and need to be salvaged. Affected trees include those that are leaning less than 45 degrees, have lost only part of their crown, have only a loss of foliage, or otherwise are not likely to die. The future growth of affected trees will likely be impaired, however, and affected trees are more likely to be susceptible to insects and disease than healthy trees.

The Louisiana Forestry Association reported that the state lost three billion board feet, or one million acres, of timber to Hurricane Katrina–an economic loss estimated at $600 million. Rita added another 1.7 billion board feet of lost timber.

Long-term effects
In early September, Aon Corporation released an analysis of losses to agribusiness from Katrina that estimated the likely long-term effects on the sector from that hurricane. Aon said interruptions to modes of transporting commodities, as well as increased fuel costs, would lead to additional losses in agribusiness across the board. Nearly 70 percent of the nation’s grain exports–wheat, corn and soybeans–pass through Louisiana, Aon noted, and the Port of New Orleans handles much of the country’s imports, such as bananas, coffee, forest products and other goods. According to Tami Griffin, senior vice president of Aon’s agribusiness group, because of the temporary disruption of the port’s operations, producers had to find other ways to move their products in the short-term, substantially increasing the cost. She added that moving grain by rail or on trucks is considerably more expensive than by river barge.

Griffin said poultry producers, the oyster industry and the sugar cane industry would be among the agribusiness sectors that could be affected long-term by Katrina. She said hundreds of chicken houses, many of which contain thousands of birds, were damaged. And many of the farms that supply chickens to the processors were hit hard by the storm. Griffin noted that the short- and long-term future of the oyster industry is questionable as the docks and boats used to harvest the mollusks were destroyed, and the pumping of polluted water out of New Orleans into the Gulf of Mexico will likely have an environmental impact on the entire Gulf coast fishing industry. In addition, sugarcane fields throughout the Gulf coast region were flattened, and two major sugar refineries near New Orleans are no longer operating. “Sugar supplies were already tight before the storm,” Griffin stated.

LSU AgCenter economist Kurt Guidry, who compiled a loss report for his state, also noted that loss figures could increase.

“For many of these commodities, the economic impact of this storm could potentially continue to grow as delays in re-establishing infrastructure exists,” the report said. “Therefore, current estimates will likely grow until some type of normalcy is returned to production.”

According the LSU AgCenter report, further losses could result if the land that was flooded is found to be unsuitable for continued agriculture.

The combined damage total from both storms is approximately 30 percent of the 2004 gross farm value in Louisiana as determined by the LSU AgCenter 2004 Ag Summary. But Guidry said a direct comparison to the Ag Summary is misleading since some of the damaged commodities, such as timber, would not have been harvested this year, and not all cattle lost from the storms would have been sold this year either.

According to the LSU AgCenter report, agricultural losses in Louisiana from Hurricane Rita include:

  • $226 million in forestry. The estimate assumes that 30 percent of the downed timber can be recovered but at a discounted price.
  • Sugarcane losses were the second largest at $68 million, or more than a fifth of the 2004 farm value. The total includes losses of recently planted cane, reduced harvest efficiency and broken stalks. The estimate does not include a presumed production loss of 10- percent to 15 percent for the 2006 crop.
  • $38 million in cotton losses. The figure includes losses from stained cotton and increased production costs because more defoliant will be needed to control re-growth.
  • $38 million in losses from crawfish production based on assessments of affected areas. Not included in the total is $57 million in infrastructure damage and saltwater effects on the 2006 crop.
  • $34 million for fisheries losses, including oysters, shrimp, crab, menhaden and finfish based on 2004 values and estimated losses. Shrimp leads the category with $18 million, followed by $8 million for menhaden (pogies), $3.5 million for crabs, $2.1 million for finfish and $2 million for oysters.
  • $33 million for cattle. The total includes current market value of lost calves, replacement value for bulls and cows and revenue lost from the forced liquidation of herds because of the lack of adequate pasture lands. But the number does not include lost future income from dead cattle.
  • $12 million for rice losses. The hurricane caused flooding and wind damage to the second crop of rice. In North Louisiana, the remaining first crop was lodged badly. Not included in the total is the amount of rice lost in storage bins that were flooded.
  • $9.5 million for hay and forage losses. The number assumes that hay stored in flooded areas was a total loss, and the forage impact was based on the amount of lost grazing days. The total does not include possible losses from forage production that may be limited on land damaged from exposure to saltwater.
  • $6.5 million for horses for losses in revenue and increased production costs. It includes pastures affected, horses and owners, damaged fencing and lost revenue from decreased training opportunities.
  • $6.5 million for alligators, including acreage affected and production losses. It is estimated that infrastructure damage totaled $13 million. Also, it’s expected that the 2006 crop will be reduced because of the effects of saltwater.
  • $5.6 million for pecans. It does not include lost trees or increased production costs.
  • Other losses are set at $9.4 million for hunting leases, $7.2 million for charter fishing, $3.5 million for damage to soybeans, $1 million for Christmas trees, $89,000 for dairy, $2.5 million for poultry, almost $400,000 for vegetables, $1.4 million for wholesale nursery plants, $1.5 million for citrus, $595,000 for honey and $1.2 million for turtles, catfish, ornamental fish and softshell crabs.
  • Seeking federal help
    Because of the federal disaster declaration in affected areas, farmers are eligible for low-interest loans, cost-sharing programs and payment deferral for debt to the Farm Service Administration, according to Guidry. But Louisiana Commissioner for Agriculture and Forestry Bob Odom wants more help from the federal government. Odom–who believes losses to Louisiana’s agriculture and forest industries could eventually reach the $2 billion mark–met with USDA Secretary Mike Johanns on Sept. 30, armed with Guidry’s loss statistics and an outline for programs Odom said are necessary for Louisiana farms to survive in the aftermath of the two hurricanes.

    “I’m hearing from farmers all over the state and the stories sadden me. These people have worked so long and so hard to provide for the people of this country. They’ve been keeping all of us fed and clothed and now they’re struggling to do the same just for themselves,” Odom said in a statement released by his agency. “It’s hard to remember when losses have been so widespread across almost every crop and in every region of the state.”

    Odom asked the USDA “to forgive all federal farm loans and repay bank loans for Louisiana farmers.” In addition he requested a loan for the Department of Agriculture and Forestry. The department would use the money to purchase downed timber from landowners who have it on their property. The timber would be subsequently marketed to pay off the loan.

    “This will allow landowners to have immediate funds to do necessary work and repairs to their property and facilities. We have many farmers with trees littering their fields, resting on their fences and barns and they need them out of their way so they can rebuild,” Odom said. “The money generated from selling that timber will help them pay for their rebuilding efforts.”
    Odom’s agriculture relief proposal also included compensation to livestock owners on a per head basis and reimbursement for hay losses, transportation of livestock, escalating fuel costs and infrastructure damages.

    From This Issue

    Insurance Journal West October 17, 2005
    October 17, 2005
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