Oil spill may harm U.S. grain exports
June 4, 2010
by Bryan Salvage
AMES, IOWA – In light of the latest failed efforts to stop the flow of oil gushing from an uncapped well into the Gulf of Mexico, projections have been made the spill may not be contained until late summer or beyond.
Chad Hart, Iowa State University Extension grain markets specialist and assistant professor of economics, said that could affect grain prices for the U.S. and overseas markets. But insiders told MEATPOULTRY.com that so far, the U.S. meat and poultry industries have been spared from this disaster.
“We’re not hearing much in the way of interruptions for pork and beef, even though some shipments do leave from the Gulf Coast,” Joe Schuele, U.S. Meat Export Federation (U.S.M.E.F.) spokesman told MEATPOULTRY.com. “However, this might be a much bigger issue for poultry. Because of the production and processing locations, the poultry industry is a heavier user of Gulf Coast ports.”
But when asked if the oil leak is impacting the U.S. poultry industry, Dick Lobb, director of communications, National Chicken Council, replied: “I have seen or heard nothing along those lines.”
In addressing possible grain export scenarios, Mr. Hart said if the oil slick enters the shipping lanes, there could be a slowdown in shipping traffic. "If the oil slick got into what is called the Southwest Passage — a canal that stretches from New Orleans to the Gulf of Mexico — we would be looking at severe delays in getting our corn and soybeans shipped overseas," Mr. Hart said. Ships can sail through the oily water, but would need to be cleaned when they enter port.
"When a ship comes into port, it would have to be cleaned if it went through the oil slick," he added. "And then when it goes to their destination, it would have to be cleaned again when it arrives." The result would be much slower movement of grain out of the Midwest to foreign markets.
More than 60% of U.S. grain goes through the port of New Orleans, according to Mr. Hart. At present, the oil spill is moving mainly to the east, so there has been little impact on the shipping lanes, which lay to the west of the slick, he said.
"If we end up with a bottleneck down there, we could see prices in the U.S. fall from 10 to 50 cents [per bushel]," Mr. Hart predicted. "Katrina had a similar impact. If that happens, people will start to look at alternative shipping routes. For instance, right now, most of our soybeans that are going to China, go through New Orleans. People may start shipping overland to the Pacific Northwest by rail to ship over to China. That is more expensive, but it is an alternative if the gulf slows down."
As long as the spill stays clear of the shipping lanes for the next few months, Hart doesn't feel there will be a huge impact on prices.
"In some ways we were lucky on the timing," Mr. Hart said. "We ship most of our grain earlier in the year, so right now there are smaller amounts of grain moving."