The oil spill in the Gulf of Mexico may drive down grain prices in Iowa and drive up the prices of things like televisions. Chad Hart, an Iowa State University grain markets specialist, says that’s what happened when the Port of New Orleans was shut down by Hurricane Katrina.
While the port at the mouth of the Mississippi is still operating, Hart says shipping lanes into and out of New Orleans may be cut off if the spill widens. “In the aftermath of Katrina, for example, what we saw here were lower commodity prices, grain prices, here in Iowa as those export shipments didn’t happen — so that left more grain here in the U.S.,” Hart says. “But we saw higher prices for those commodities that we tend to import, such as consumer electronics.”
About 60% of all the grain that’s exported from the U.S. goes out through New Orleans. About two-thirds of the corn that’s grown in Iowa is used within the state for livestock or ethanol production and the other third is shipped out and Hart says the Iowa grain that’s destined for overseas markets is exported through New Orleans and the Gulf of Mexico.
“In this case the oil slick has not moved into the shipping lanes so we haven’t had an impact yet,” Hart says. “We don’t know if the oil will move into those shipping lanes or not.” Cargo ships can sail through an oil slick, but they have to be cleaned before they reach their destination port.
“It is a major cleaning process to get the oil removed from these ocean liners,” Hart says, “because you are talking very large ships that move large quantities of materials.” If the canal that goes from New Orleans out to the Gulf of Mexico is plugged up with oil, Hart expects “severe delays” in getting U.S. corn and soybeans shipped overseas.
According to Hart, the oil spill so far has been moving to the east and the shipping lanes into New Orleans lay to the west of the oil slick. Hart says if the oil spill shifts and causes major delays in shipping into and out of New Orleans, a “bottleneck” in that passage could depress Iowa corn and soybean prices by as much as 50 cents per bushel.