September 30, 2005 | By: Aimee Nielson
LEXINGTON, Ky.

Recent hurricanes Katrina and Rita did not spare agricultural and rural areas. University of Kentucky Agricultural Economist Lee Meyer said there will be short-term and long-term impacts for Gulf Coast, and even Kentucky, livestock producers.

“The states that suffered the greatest direct impacts were Louisiana, Mississippi and Alabama, and they only have a small percentage of U.S. cattle and hogs – about 3 percent of the cattle and less than 1 percent of the hogs,” Meyer said. “Individual producers have had significant losses and are struggling to rebuild homes, barns and fences. Some are desperately trying to find hay for their cattle; however, the industry impact is small.”

Where poultry is concerned, Mississippi has about 10 percent of U.S. chicken production, and Meyer said that a loss of 20 percent to 30 percent of the poultry houses could have a noticeable impact on poultry production in the short run.

“While flocks and production houses were lost, the integrators will intensify production at existing operations to make up for losses in Mississippi,” Meyer added. “So, the industry will be pretty much back to normal within a six- to eight-week production schedule.”

Ironically, the indirect impacts likely will be greater, and in some instances, they may be positive for the livestock industry. On the feed side, the impact from the loss of shipping infrastructure is greater than direct crop loss, Meyer said. The affected states account for about 4 percent of soybean production and a little more than 1 percent of corn.

“As a result, even major losses will hardly be noticed in the markets,” he said. “However, since more than half of our exports of corn and soybeans leave through New Orleans-area ports, problems could impact shipping schedules and cause rerouting and increased costs.”

Meyer said there will be a backup, and harvest prices will be lower than usual and more crops will need to be stored. Most likely the difference between harvest season price and winter/spring price levels will widen, giving grain users an opportunity to profit by buying early and storing for later use, he said. 

While many factors influence feeder cattle prices, lower corn prices almost always lead to higher feeder cattle prices. The price of corn is 30 cents, 15 percent, lower per bushel than it was a year ago, which equates to about $2 to $4 per hundred weight in higher feeder cattle prices.

“As a result, Kentucky and national feeder cattle prices have been increasing since the hurricanes, contrary to normal for September,” Meyer said. “Once ports are completely open, corn price may rebound, taking some strength out of the feeder cattle market. Producers with cattle ready for sale may want to take advantage of current price levels; however, if calves are gaining well with a low cost of gain, the value added is probably higher than the loss of slightly lower market prices.”
Meyer believes that more economy-wide issues may affect livestock producers. Energy prices have risen and are expected to remain at much higher levels. More energy intensive enterprises, such as heating broiler houses and using nitrogen fertilizer for corn, will bear the greatest impact, he said.

“With more corn moving to ethanol production, corn prices will be higher in the future,” Meyer concluded. “And, while somewhat speculative, the cost of providing aid and the impact of higher fuel costs could harm the overall economy. While a ‘hurricane recession’ is not likely, some of these factors could hurt demand, especially for beef.”

 

Contact: 

Writer: Aimee Nielson 859-257-4736, ext. 267

Contact: Lee Meyer 859-257-7272, ext. 228