Food crop prices to benefit from Hurricane Katrina?

By Lindsey Partos

- Last updated on GMT

Related tags: Hurricane katrina, Louisiana

As Hurricane Katrina hammers the US state of Louisiana damaging
corn and soybean crops in its wake and creating bullish trading in
the energy markets, the storm could actually benefit food crops
located further north, affecting global prices.

Hit by summer droughts, the shot of late season moisture could be just what the soybean crop in Indiana needs to finish strongly.

The US is the number one global producer of soybeans, and as such, the country's production serves as a general barometer for world prices of this increasingly popular grain.

Chicago corn and soybean futures closed slightly higher Monday, seeing soybean prices boosted after they fell to a new six-month low on Thursday.

Hurricane Katrina, that hit southern Louisiana early Monday, fed some of the price support.

Heavy rain from the storm was expected to slow early harvest and could harm some of the crop in Alabama, Mississippi and Louisiana.

But it seems the major crops are still growing in most parts of the country, and harvest is a few weeks off.

In addition to soybeans and corn, Louisiana produces large crops of sugar cane, sweet potatoes, rice, and pecans.

In parallel to the impact the storms will have on the crops, traders fear disruptions in shipments of raw materials through the Port of New Orleans, where more than half of the nation's grain exports depart for overseas.

Reports from the US claim it is too early to know the damage to shipping terminals or other facilities.

According to the Washington Post​, in the "worst-case scenario, snarled river traffic would force shippers to rely on rail or truck transportation"​, which are more expensive options, particularly with fuel costs rising.

The Mississippi River is the cheapest route for shipping many crops and other commodities destined for overseas markets.

"Although there's never a good time, it's not as critical as it would be, say, six or eight weeks down the road, when there would be a flood of corn and soybeans coming down the river,"​ the newspaper cites Terry Francl, economist for American Farm Bureau Federation in Washington.

Leading grain supplier Cargill, that has several grain terminals in the area, told​ that the extent of the damage is still unclear.

With regards to oil, market on Wednesday showed prices were creeping back towards the nominal record high of $70.85 a barrel hit on Tuesday as speculators expected US oil inventories to be squeezed.

And pressure on prices will continue s reports claim that damage assessments estimate it may take a week to restart refineries hit by the hurricane.

Related topics: Market Trends

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