I don't get this, can you explain about loss in demand for midwest grain

[HereSince1628]

I understand that Katrina destroyed port facilities, that may not be back up and running as the midwest gets ready to peak its grain harvest.

To get around the problem at the ports of Southern Louisiana, grain will have to be shipped to other ports using more expensive transportation.

I can see how this would drive up the cost of grain to overseas purchasers, but not how it would reduce world demand. Why should the midwest grain have lost value? Is the international market for grain that soft, really?

It's my understanding that the US produces a huge proportion of the world's soybeans and corn. Won't a failure to ship midwest grain make these commodities scarce (at least until the southern hemisphere produces its crops in late winter and spring)thus driving up cost?

What's the margin between the increased cost of shipping and the expected increased cost due to the reduction in availability? Is it really cheaper for the world to go without the US grain than to pay the increased cost in shipping?

[flygal]

1. All I know is

I have a friend who lives in Brazil and ADM and Monsanto are big down there.

[HereSince1628]

3. I know that Brazil is a big player in production in the southern

hemisphere. But do they have that much surplus sitting around?

[Coastie for Truth]

2. Grain is fungible.

Shipping through Houston or San Francisco or St. Lawrence Seaway Ports would make mid-western grain more expensive then fungible grain from other regions.

[HereSince1628]

5. Well, yes if there is adequate capacity in other alternate

sources or similar commodities. But that sort of begs the question.
Who is producing that surplus and has it ready for delivery from Oct-Dec?

[HereSince1628]

8. Some of the numbers

looking at maize (field corn), the use produces at least half the world's corn. Most of this corn is produced in the Midwest.

Definition: Figures for 2003/2004

Maize Production
All values in thousand metric tons

1. United States 46,000
2. Argentina 11,500
3. China 8,500
4. Brazil 5,500
5. Ukraine 1,300
6. South Africa 1,000
7. Hungary 700
8. Canada 300
9. Thailand 100
10. ??? 100
11. Romania 50
Total 75,050


Lumping various grains together... The US exports more grain than the next 8 producing countries. I'm not sure what proportion of this coarse grain is corn...but something like 1/4-1/3 of all the grain exports went through New Orleans...Who in the world is going to have 12,000 to 17,000 thousand metric tons to make up the difference?

Coarse grain exports
Definition: Figures for 2003/2004 in thousand metric tons


Amount
1. United States 51,455
2. Argentina 12,215
3. China 8,525
4. ??? 5,015
5. Australia 4,250
6. Canada 3,925
7. Ukraine 2,835
8. Russia 2,400
9. South Africa 1,025

Total 91,645 thousand metric tons
Weighted Average 12,513.97 thousand metric tons
http://www.nationmaster.com/graph-T/agr_gra_coa_gra_exp
original source: United States Department of Agriculture, taken off

[Spazito]

4. It could also be the combination of increased cost AND the intent

of other countries to reduce their imports from the US and go elsewhere. There is a concerted effort, imo, for countries to reduce their dependence on US exports as well as their dependence on exporting their goods to the US.

[newportdadde]

6. Are you talking about the price paid to the farmer?

That market is much like any commodity and can be manipulated etc. Having grown up farming both row crops and beef cattle both industries are heavy with powerful folks who can bend and flex the price. Particularly the cattle market given on a handful of powerful packers control it.

[eallen]

7. Increased price drives down demand. That's really all there is to it.

Seems to work with every commodity except gasoline. ;D

I can imagine that the demand curve for grains is pretty elastic. Keep in mind that grains have multiple use. Not all are ground into flour and baked into breads. Some are turned into oil or sugar substitutes. Some go into animal feed. I can imagine quite a bit of shifting back and forth in what uses are made, and substitution, if grain prices go up. Maybe some sweet drink popular in east Europe will now be made with beet sugar instead of high fructose corn syrup. Or something like that.

[HereSince1628]

10. But fungibility is a consequence of _available_ alternatives

both in terms of different products and different sources.

According to the above numbers the US production (mostly from the 'midwest') is at least half of the world's exportable grain supply. The proportion of that _lost_ from New Orleans is _more_ than that reported for all the exports of Argentina the next largest exporter of coarse grain...what country (or countries) is (are) sitting on so much previously non exported grain?

I thought I understood basic economics and the idea of fungibility. I don't know world grain supplies, it just seems like US exports are such a big part of it...

And I can't get my head around how the loss would be made up.

[Tatiana]

9. Farmers in Illinois are pretty worried. n/t

[HereSince1628]

11. Farmers throughout the Upper Midwest are worried...