Troubles Travel Upstream

The hurricane happened "at a pretty bad time for the grain market," said Kevin McNew, president of Cash Grain Bids Inc., a commodity intelligence firm. Last year, McNew said, was a record for corn and soybeans, which drove per-bushel prices down; many farmers held on to a large portion of their crop, hoping prices would rally. As a result, many farmers and grain elevators find themselves with last year's crop still sitting in their bins. Now they need to sell to make room for this year's harvest.

"It's a logistic nightmare," said Patrick Mino, grain division manager for Access Ag Inc., which has five grain elevators in northern Illinois. Mino said he had to make room in his elevator last week by shipping out two trainloads of corn, or 840,000 bushels. "It was a fire sale," Mino said, because he would have gotten about 10 cents more a bushel, or $84,000 total, if he had been able to use barges.

Each week, about 35 million bushels of corn are exported from the United States, most from the Gulf of Mexico, said Darrel L. Good, an agricultural economist at the University of Illinois at Urbana-Champaign. "Grain is going to have to start moving through that export facility really soon or there will be a big problem."

Putting downward pressure on price are higher barge costs. Freight prices have climbed to a record $25 a ton from $15.20 a ton two weeks ago, according to a barge company executive who spoke on condition of anonymity because of his company's policy. About 400 barges have been damaged or stranded or remain unaccounted for, the executive said. Others are in use, waiting to be loaded or unloaded at facilities that are not open.

Farming is always a gamble, and the Walsh family knows that well. Last year, Frank, his two brothers and father harvested record crops and received an average $2.25 per bushel for the corn they sold. They still have about 30,000 bushels, or 20 percent of the crop, in storage. In July, the family sold some of it for about $2.40 a bushel but held a lot back, betting prices would rise as the drought worsened. But even before Katrina, prices had dropped to $2 a bushel. "We wish we sold in July," brother Matthew Walsh said, grimly and softly.

His demeanor quickly changed, however, when he talked about the business bet the family made on diesel fuel for this harvest. Last February, they signed a contract for diesel fuel at $1.73 per gallon. At 10 cents above diesel's selling price at the time, that was considered a bold move. But today, with diesel selling for about $2.90 per gallon, it was the right one, he said, his face breaking into a wide smile.

"We know first hand that Mother Nature is our partner and there's nothing we can do that can change what she gives us," said Walsh's father, Larry. "For the last two years, she's been an excellent partner. This year, she's dealt us a challenging hand. We have to work the best we can with it."

Mayer reported from Illinois. Joyce reported from Baton Rouge.