The Port, the Storms and the Economy
LINDA WERTHEIMER, host:
The Gulf states are still trying to determine how much damage has been done to that region's industries and agricultural production in the wake of Katrina and Rita. Louisiana, Mississippi, Alabama and Texas provide much of the seafood, sugar, citrus, nuts, poultry and livestock that Americans enjoy year-round, and the Port of New Orleans conveys wheat and other commodities to destinations worldwide. But crop devastation and disruption in shipping has yet to adversely affect most Americans. Yra Harris is the senior partner at Praxis Trading in Chicago, and he can tell us why. Mr. Harris joins us from our studios in Chicago.
Mr. YRA HARRIS (Praxis Trading): Thank you, Linda.
WERTHEIMER: Why aren't Americans feeling a pinch yet?
Mr. HARRIS: The first effects haven't really been measured out yet. At first, people thought the devastation would be closing the ports of New Orleans, which would have different types of effects. Number one would be, of course, the import of certain goods. We bring a lot of coffee in through those ports. And for the American farmer, the danger was coming into harvest season that you would have grain piling up in the US ports.
WERTHEIMER: But it hasn't happened yet?
Mr. HARRIS: No, we have not really seen that effect. There's been an effect on cotton prices in the short term. As the cotton comes into harvesting, there's some speculation that there'll be some damage to the cotton crop. Outside of that, coffee prices did rise because the big coffee warehouses are down in New Orleans, and people didn't know about how they'd be impacted by the flood. But those prices have actually come back lower than they were prior to the first hurricane hitting.
WERTHEIMER: Are markets so big and so flexible now that temporary losses from just about any region could be absorbed--California, for example, or the breadbasket, the Middle West?
Mr. HARRIS: Well, no. I mean, if the damage was so severe you couldn't make up for it. There's only so much food and you can't replace it overnight. But we do seem to see a resiliency, being that--I can remember the Green Revolution and its impact upon especially the developing world. It really has made a difference. You see Brazil and Argentina, who could certainly jump in and fill the void of any shortness that would develop in the US, and that's what you would see, but we haven't quite gotten to that point yet.
WERTHEIMER: So do you think that globalization has put a net under us all?
Mr. HARRIS: Well, to some regards, yes, that's true. But on the other hand, the other effect is that you see rising energy prices, and that too is a product of the success of global growth. Everybody's been caught off guard by the huge amount of demand that's now coming out of China and India and other places, Brazil especially. So that's the good and bad.
WERTHEIMER: So is any region of the country, any sort of area of production, indispensable now?
Mr. HARRIS: Yeah. I think the damage that we're going to see--and it was already showing itself even before the hurricanes--is in the natural gas production. Natural gas prices are up, as of yesterday, about 125 percent year to date, which is--far exceeds petroleum, and heating oil's up quite a bit, too. And natural gas just cannot be replaced as easily as oil. You can't go and get refined products. Natural gas is really domestically driven. Until we see some huge increase in the LNG or liquefied natural gas and being able to actually bring it from other places, we're kind of caught in this trap.
WERTHEIMER: And so we could expect heating prices to really go through the roof this winter for people who use natural gas for heating and cooking.
Mr. HARRIS: Linda, I've been talking about this since actually February, because natural gas was starting to move up then. This is going to be dramatic, and this is going to be the impact. And unfortunately, it doesn't show on a television picture; you know, you can't go out to the pump and see them change prices every hour. This is going to be on a monthly basis, and it's going to be dramatic.
WERTHEIMER: Yra Harris is the senior partner at Praxis Trading in Chicago.
Mr. Harris, thank you very much.
Mr. HARRIS: My pleasure. Thank you, Linda.