NEW ORLEANS, LOUISIANA, US — Global agribusiness and food ingredient companies with assets in the Gulf region were prioritizing employee safety and assessing damage to facilities this week after Hurricane Ida disrupted grain and oilseed exports from the Gulf Coast, which typically handles 60% of US exports.
Some grain companies said it could take weeks to restore power to Gulf-area locations following Ida’s landfall near New Orleans on the 16th anniversary of Hurricane Katrina. Floodwaters poured into the region, but massive infrastructure projects in the years since Katrina included rebuilt levees around New Orleans that held back the waters from many residential areas, lessening the potential devastation.
Ida was classified as a category 4 hurricane when it made landfall mid-day Aug. 29 in Port Fourchon, Louisiana, US, just south of New Orleans, packing 150 mph maximum sustained winds and driving rain. All of New Orleans, including more than 1 million residents, was left without power after the hurricane hit. The storm, which rapidly weakened and was downgraded to a tropical storm after making landfall, also knocked out power for 133,000 Mississippi residents.
Grain facilities in the region were without power and some were inundated with floodwaters. Their first priority was employee safety, the companies’ spokespersons said, and no fatalities among that cohort were reported to Milling & Baking News, a sister publication of World Grain. As Tropical Storm Ida continued to issue heavy rain Aug. 30, emergency officials and Louisiana state government leaders encouraged those who could do so to stay home to avoid hazards from downed trees and dangerous roadways. After employee safety was confirmed, agribusiness companies began to assess damage to facilities.
“The power is the biggest thing, but if a facility is full of water, they are shut down for a few weeks to see how quickly the water recedes and only then can they assess what damage, if any, took place,” a veteran commodities trader said.
Chicago, Illinois, US-based ADM has four grain elevators and port operations in the region, including locations in Ama and Destrehan, Louisiana, US, just west of New Orleans. The food processing and commodities trading company shut down all facilities ahead of Hurricane Ida making landfall. By Aug. 31, ADM had confirmed all its employees in the region were safe and began assessing damage to facilities.
“We are sending volunteers and supplies to support our teams on the ground, and we are working hard to restore operations as quickly as possible,” said Jackie Anderson, a spokeswoman for ADM. “We are in the process of accessing damage to our facilities. So far, we are not finding significant structural damage, but power remains out in the area. We will have an estimate for reopening once we can determine the timeline for full power restoration or temporary generator service.”
Bunge Ltd. on Sept. 1 told Milling & Baking News any damage to its facilities was minor.
“There is no significant structural damage to our facilities, but they are not operating as there is no power and we have not received an estimate from the utility on when it may be restored,” said Daiana Endruweit, global media relations manager with the St. Louis, Missouri, US-based company.
Minneapolis, Minnesota, US-based Cargill has a terminal in Reserve, Louisiana, US, upriver from New Orleans, and a location in Westwego, Louisiana, US, in the New Orleans area. Both facilities sustained damage, said April Nelson, senior director of global communications and issues management with the company.
The company said Sept. 1 it still was focused on employee safety amid ongoing power outages and flooding in the area.
“This area in southeast Louisiana is still facing significant personal safety concerns and power outages, so we are just able to start assessing the storm’s impact on our operations and the river system,” Nelson said. “We don’t currently have a time frame for resuming operations. With power not yet restored to the area, communications with teams on the ground has been limited.”
Photos circulating on Twitter showed the exterior of the Reserve location battered and in disarray, its grain conveyor system partly collapsed in Ida’s aftermath. Cargill’s salt and animal nutrition facilities initially saw delayed operations, but physical damage was minimal at those locations, and they were able to resume operations within 24 hours from Ida’s landfall, Nelson said.
CHS Inc.’s Myrtle Grove Terminal in Belle Chasse, Louisiana, US, was without power after Ida knocked out a transmission line.
“Best estimates as to when power will be restored at the terminal are in the two-to-four-week range,” John Griffith, executive vice president at CHS Global Grain & Processing, told Reuters.
Companies that sustained significant damage and were facing a lengthy wait for restored power were looking to their other export outlets, a veteran commodities trader said.
“They’re trying to run supplies through the Texas Gulf or forcing the Pacific Northwest to pick up more exports, trying to change up the direction of exports to get to China and wherever else they were headed,” she said. “Facilities that typically handle only one commodity might be forced to pick up more, which makes them less efficient because they have to stop running one commodity, change over to run another commodity and back again. It’s time-consuming and efficiency drops when a location is handling more commodities than what they were set up to do.”
CHS Inc. hoped to divert September export shipments scheduled through the Gulf through Washington state instead.
“They have been looking for alternatives,” a commodities analyst said. “For example, the facility in Kalama, Washington, US, only handles wheat and CHS’s joint venture with Cargill in Tacoma handles corn and soybean. But Kalama may end up running corn and/or beans. Out of the Texas Gulf, Beaumont and Galveston, there is some chatter that exports could be re-routed there or up through the St. Lawrence Seaway.”
ADM offered few details about workarounds in progress, but the company “has a vast transportation network and we are making alternate shipping arrangements as necessary to meet customers’ needs as we manage through this difficult situation,” Anderson said.
A day after Ida moved through southeast Louisiana into southern Mississippi, cash premiums for grain delivered by barge to Gulf terminals dropped sharply as terminal managers grew concerned over a lengthy recovery. More plans for alternate grain flow routes were expected in the coming days. But without question, transport time to destinations would increase, analysts said, and grain transportation costs were expected to increase.
“Transportation is going to get pretty expensive from anywhere that’s a tributary to the Mississippi River,” a trader said. “Barge freight values we figure will go a lot higher. Rail freight will move higher. Truck freight has already been in demand and there’s a lot of talk about how hard it is to get trucks. God forbid any of the truckers should retire any time soon, it will just make it more impossible. The refineries at the Gulf shut down beforehand, and didn’t seem to be badly damaged, but analysts figure gas prices will see a hike, at least in the short term.”
One veteran market watcher also forecast lower premium ranges for hard red winter wheat on the Minneapolis basis.
“Minneapolis basis will get weaker,” she said. “Demand is there, but if they can’t load it and move it out as quickly, grain could get backed up. It just stops if there’s no outlet for it.”
At the same time, potential grain gridlock comes in a year where a smaller spring wheat crop is projected, leaving ample storage,
“If this was going to happen at some point, it might not be the worst year for it, because of the dryness,” she said. “All the crops are smaller than the typical crop, but larger than what was expected. Take wheat for example. Growers in North Dakota, western Minnesota, South Dakota were thinking they wouldn’t have any bushels. But they started harvesting, and they do have some bushels — 15 to 20 bushels, 20 to 25 bushels. Some areas with 30 to 40 bushels, then farther east, 50 to 60 bushels, 60 to 70 bushels. There are areas that didn’t get squat, only 5 to 10 bushels, but overall, the spring wheat crop is bigger than expected, but not up to their five-year average. Thin kernels but good quality. So, there’s less grain to start with, and there certainly is ample storage. If prices go down and producers don’t like the price, they could put all the supplies in a bin, and what doesn’t fit in a bin will find a place in elevator storage, which is super plentiful.”