Purdue News

September 9, 2005

Economists: Katrina's impact could reach harvest-ready crops

WEST LAFAYETTE, Ind. - Hurricane Katrina left her mark on hundreds of miles of coastline along the Gulf of Mexico, and now she could exert her influence on mature corn and soybean fields in Indiana.

Hoosier farmers with healthy crop stands and room in their grain bins might consider leaving the crop in the field a bit longer or storing corn if they cannot postpone harvest, said Purdue University agricultural economists Chris Hurt and Corinne Alexander. Waiting for grain shipments along the Mississippi River to return to normal before marketing their crop could increase farmers' profits and save on drying costs, they said.

Grain-carrying ships are starting to move into the Gulf through New Orleans ports for the first time since Katrina shut down export traffic on the Mississippi River. About 75 percent of the nation's corn and soybeans shipped through ports goes through Louisiana.

The transportation bottleneck caused grain prices to fall at river terminal markets, Hurt said.

"If we're able to open that transportation system back up, then we should see a return to fairly normal price levels and, particularly, the basis levels," Hurt said. "We're starting to see some stabilization and improvement on the futures side. For producers, that means they might want to avoid moving and selling cash grain in the next week to 10 days, until the market is more stable."

Hurt also recommended farmers put their harvest plans on hold, if they can.

"This is an individual decision, but letting the corn dry down in the field a little bit more will reduce the amount of propane for drying, as well as give a few more days for the river system and transportation to get back to where it needs to be," he said. "If producers cannot delay harvest because corn is down in the field, then seeking on-farm storage probably would be the first choice."

Storage capacity should be adequate this season, Alexander said.

"In a normal crop year, Indiana has sufficient capacity to store the entire crop," she said. "About 65 percent of Indiana's storage is on farm, which is good for producers who can store on farm and wait to price. Going into this year, we are a little bit below trend on both corn and soybean yields, so there won't be as much pressure to be able to move grain through New Orleans."

Indiana is projected to produce 819.3 million bushels of corn this fall, at an average of 145 bushels per acre. State soybean production is estimated at 251.6 million bushels, averaging 46 bushels an acre. Both yield estimates are down from record levels in 2004.

Yield estimates also are lower in other Corn Belt states. In drought-plagued Illinois, for example, corn yield is projected at 125 bushels an acre, off 55 bushels from one year ago.

Hurricane-related grain price volatility has pushed federal loan deficiency payments (LDPs) higher. LDPs pay producers the difference per bushel between the local county posted price and local county loan rates when prices dip below loan rates.

"One other advantage that may play into the favor of farmers is LDPs," Hurt said. "LDPs on corn are based on terminal market prices around the country, and one of those is the Gulf market. Because of the low bids at the Gulf market, we've seen LDPs as high as 37 cents in Indiana. We thought 30 cents to 35 cents was about as high as they would get. So it may be an advantage for those that have early harvested corn to try to LDP that crop as early as possible this year, then store that corn and try to price it a little bit later. As we get the river system restored, those LDPs will probably drop."

While much weaker when she moved across Indiana, Hurricane Katrina did do some damage to the state's corn crop, said Bob Nielsen, Purdue Extension corn specialist.

"Some fields have begun to lodge severely, especially in areas affected by the remnant rains and winds of Hurricane Katrina that moved through southern Indiana last week," Nielsen said. "The further bad news is that more fields with stalk rot or insect-damaged stalks will be at risk of severe lodging if another storm system moves through the state before harvest, or if rainy weather sets in for an extended period."

Recent warm, dry weather should help, Nielsen said.

"The rapid grain drying of the corn crop will facilitate earlier harvest of fields weakened by the development of stalk rots or insect damage to the stalks. Stalk rot development is especially likely in fields where severe drought stress prevailed during the grain filling period," he said.

For more information about on-farm grain storage, read Purdue Extension publication GQTF-38, "Temporary Grain Storage Considerations," by Dirk Maier, Purdue Extension grain quality specialist, and William Wilcke of the University of Minnesota. The publication is available online.

To learn more about in-field grain drying and stalk damage, read Nielsen's "Grain Drydown, Stalk Lodging, and Harvest." The article can be accessed online.

Writer: Steve Leer, (765) 494-8415, sleer@purdue.edu

Sources: Chris Hurt, (765) 494-4273, hurtc@purdue.edu

Corinne Alexander, (765) 494-4249, cealexan@purdue.edu

Bob Nielsen, (765) 494-4802, rnielsen@purdue.edu

Dirk Maier, (765) 494-1175, maier@purdue.edu

Ag Communications: (765) 494-2722;
Beth Forbes, forbes@purdue.edu
Agriculture News Page


Related Web sites:
Purdue Department of Agricultural Economics

Chat 'n Chew Café

Post Harvest Grain Quality & Stored Product Protection Program


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