Strategic threat to US economy from Katrina

Right after Katrina devastated New Orleans, Dr. George Friedman, founder of Stratfor, wrote this incisive article describing the implications of Katrina for the US economy.

http://www.stratfor.com/news/archive/050903-geopolitics_katrina.php

In short, he points out that the Port of New Orleans, the fifth largest in the world, is essential for midwest agriculture and industry. Ocean going vessels are constrained by geography depend on New Orleans to deliver industrial raw materials and to pick up export grains and finished products. The train and truck networks in the region are incapable of picking up the slack and routing shipments to and from other ports. The Mississippi barges are the cheapest, most efficient way to transport the immense volumes that pass through New Orleans.

Without the constant through put from the port, the midwest would be seriously hurt, with implications for the entire US economy.

While travelling recently, I had the opportunity to visit Cape Girardeau, MO and to informally interview a manager at the Missouri Dry Dock Co. This is his assessment of the situation as of October 3. Since I have been travelling constantly, I have only had an opportunity to pass this information along today.

According to the person I spoke with 50-60% of New Orleans traffic is not moving. The docks are physically in good shape, but they don't have enough people to man them and can't get the people into the area to work the docks.  There is no place to house them, no services (schools, hospitals etc.) He has no idea how long it will be before they have full service at the docks.

Grain is piling up unshipped and in danger of rotting. The wheat harvest should begin about  the second week of October, and there is no provision for shipping it. Soy beans haven't been harvested because there's no place left to store the crops to await shipment.

A friend of mine in Cape Girardeau confirmed the local harvest situation. His cousins, who repair farm machinery in the fields, say that business is way off, since farmers aren't using the equipment because storage is full.  Food prices are likely to rise, as are the futures on grain.

My sources could not provide me information about the effect on the industrial sector.

•  Ag Commodity Prices

  Corn, Wheat, and Soybean prices are all still considerably lower than pre storm and will probably stay low for this season.  The closure of the Port of New Orleans has effectively limited the Market to the the US, increasing the local supply by removing the foreign customers.  

  by BTower on Mon Oct 17, 2005 at 05:41:41 AM PDT

  •  One can already see this

    in grain based agricultural prices. It was predicted by consensus forecasts, and so far the effect is in line with expectations.

    by Stirling Newberry on Mon Oct 17, 2005 at 06:04:21 AM PDT

    •  Forcasts

      Which one's Harvest Forcasts, or post storm futures pricing?

      My impression was that the havest for this year was not going to be especially good.

      by BTower on Mon Oct 17, 2005 at 06:06:39 AM PDT

  •  Where are the foreign customers going for grain?

    Should there be an effect on markets from the fact that the grain is largely unmoveable?

    by unclejohn on Mon Oct 17, 2005 at 06:12:27 AM PDT

•  before

  Before there was a Port of New Orleans, how did the grain get to market?

  by NYCO on Mon Oct 17, 2005 at 05:43:48 AM PDT

  •  People ate it in the fields

    or in  nearby wigwams.

    by Cache on Mon Oct 17, 2005 at 05:55:28 AM PDT

  •  The Port of New Orleans

    was created by the French in the 18th century. They recognized the strategic importance of the site for the area that later became known as the Louisiana Purchase.

    Below New Orleans, there is insufficient high ground to build a city/port. Above New Orleans, the Mississippi is too shallow for ocean-going vessels.

    by unclejohn on Mon Oct 17, 2005 at 06:10:06 AM PDT

  •  It was only in the early 20th Century...

    ...that the midwest became the US breadbasket.  It took railways, a vast influx of european settlers, and irrigation using wells to make this area viable for large-scale agriculture.

    Prior to midwest farming, the northeast was our major farmlands.  In fact, one of the last farms on Manhatten island was sold for development in the early 1920's, and was the site for the present day Empire State Building.

    by redtravelmaster on Mon Oct 17, 2005 at 06:57:24 AM PDT

    •  what about

      the Great Lakes as a shipping route?  Sure, the St. Lawrence winds up in the north Atlantic, but why such a heavy reliance on one port (New Orleans), to the point where it could have such a bad effect on the economy if it weren't functional?  (all our customers are down there, I suppose?)

      by NYCO on Mon Oct 17, 2005 at 07:53:51 AM PDT

•  Thank You for this post

  It continues to confirm my beief that our government is vastly downplaying the real economic effects of Katrina.  

  I suspect our economic problems are only beginning.  

  by redtravelmaster on Mon Oct 17, 2005 at 06:52:29 AM PDT

•  Great post

  thanks

  by respectisthecentralissue on Mon Oct 17, 2005 at 07:06:45 AM PDT

•  similar article

  Friend of mine just wrote this article for financial sense on the ongoing impact of Katrina/Rita
  http://www.financialsense.com/fsu/editorials/2005/1011_b.html
  

  by chairmaker on Mon Oct 17, 2005 at 07:45:34 AM PDT

•  Thanks for this diary unclejohn,

  I've linked your diary here: The Missing and the Dead Part II.
  where I've been attempting to keep track of Diaries/Links regarding seeing to the missing, the dead, and related hurricane issues.
  

  by DianeL on Tue Oct 18, 2005 at 10:26:40 AM PDT