Just a week ago, if experts were asked to name the cities that power the mighty American economy, few would have answered New Orleans.
Jazz, hospitality and Cajun culture were the hallmarks of the famous community.
But Hurricane Katrina’s catastrophic winds and water have changed all that.
While New Orleans isn’t the centre of finance like New York’s Wall Street, or of high tech like California’s Silicon Valley, it is the connecting point between the Gulf of Mexico and the Mississippi River.
The gulf region also accounts for about 30 percent of United States oil production, a fifth of its natural gas output and its refineries provide about 10 percent of U.S. gasoline.
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It is a major gateway though which steel, lumber, coffee and other products enter the United States and move up the Mississippi River.
About 55 percent of U.S. grain production is exported through New Orleans and its sister Louisiana ports, in addition to a host of other goods and commodities.
Since the hurricane struck Aug. 29, killing many, doing billions of dollars in damage, making hundreds of thousands homeless and cutting power to the region, almost all of this activity has stopped and it will likely be more than a week before port traffic and energy production resumes. It might be months before operations return to normal.
As is only too evident, the disruption to oil and gas production and refinery operation caused fuel prices to soar. Worries that higher energy costs will slow the American economy caused the U.S. dollar to sink.
Wood costs are rising because of the loss of lumber stocks in port warehouses, the storm damage to several lumber mills in the South and, longer term, the expectations of huge demand as the staggering rebuilding effort begins. The only morsel of good news out of this might be that the U.S. will rethink its duties on Canadian softwood lumber that add so much to the cost of constructing homes in the U.S.
With 15 export port elevators in Louisiana, grain exports are sure to suffer for a while. Corn and soybeans will feel the main impact. Only 22 percent of U.S. wheat exports go though Louisiana ports. Most of the hard red winter wheat goes out of Texas ports and most of the spring hard red wheat goes out through Portland, Oregon.
As of Sept 2 when this was written, opinion about resumption of grain shipments ranged from worry that there would be lack of capacity during the peak harvest delivery period in September and October, to more optimistic talk that some movement would begin in the second or third week of this month.
Despite the worries that long delays in grain shipments could cause buyers to look elsewhere, raising the specter of large, price depressing year-end stocks, grain prices did not collapse. Chicago corn, soybeans and wheat futures on Sept. 2 were only down fractionally from the week before. Minneapolis spring wheat was down only a few pennies.
Winnipeg canola was up slightly from the previous Friday, surprising because drier weather for harvest was in the forecast and the Canadian dollar had appreciated against the greenback. This time last year, the loonie was worth about 77 cents US. Today it is about 84 cents, up seven cents or 10 percent in a year.
It is still too early to determine the hurricane’s longer-term effects but the outlook is gloomy. And hurricane season doesn’t end for another six weeks.
