Matt Fannin, Merrill, Thomas A.
News Release Distributed 05/03/07
A great deal of attention has been focused on the immediate and lingering effects of hurricanes Katrina and Rita on agricultural commodities, but the hurricanes also affected processors and marketers of those products.
According to Dr. Matthew Fannin, agricultural economist with the LSU AgCenter, the total value-added created by the overall food and fiber system in Louisiana declined just over 3.5 percent during the time frame of the storms – from $8.57 billion in 2004 to $8.27 billion in 2005.
"In particular, the state’s largest single food and fiber product sector, the food product manufacturing sector, was hit especially hard," Fannin said. "Approximately $70 million dollars in value-added was lost between 2004 and 2005."
Value-added is the difference between the price of a product sold and the cost of the materials and services required to produce it.
Fannin commented that sectors making up the food and fiber system in Louisiana appeared to be more severely affected by the hurricanes than other sectors that weren’t related to agriculture. Outside of the food and fiber system, the only large economic sectors that saw measurable declines in value-added in 2005 were the finance, insurance and real estate sectors.
"In fact, despite many refineries being shut down and energy exploration activities temporarily halted as a result of the storm, these sectors actually saw increases in value-added during the year," Fannin pointed out, adding, "The mining sector showed an increase in value-added exceeding 4 percent, and petroleum and chemical product manufacturers saw value-added increases exceeding 7 percent."
The LSU AgCenter economist said, however, that it is difficult to project the long-term effects the hurricanes will have on the food and fiber system in the state.
"Since value-added is the difference between the value of the product sold and the cost of materials and services needed to produce the product, it is difficult to assess what the future holds for the larger food and fiber system in the state," he said.
According to Fannin, some processing sectors, such as apparel and textile manufacturing, have essentially left Louisiana, while others such as the secondary wood product manufacturing sector are growing in the state. Another value-added food and fiber sector that shows potential in Louisiana is biofuel production, he added.
"Biofuel production will affect value-added in two areas. The first impact will occur in the increasing value of agricultural feedstocks used in biofuel production, such as corn, grain sorghum, and soybeans," Fannin said. "The second impact will occur in the biofuel processing plant itself as the agricultural feedstock is transformed into higher value-added ethanol and bio-diesel."
To learn more about how agricultural commodities are being transformed into higher value-added food and fiber products, visit www.lsuagcenter.com. (Type B-886 in the search box to see the research bulletin from which this material is drawn.) You also can see information on a variety of topics ranging from 4-H youth development to caring for your lawn and garden on that Web site, or you can contact an agent in your parish’s LSU AgCenter Extension office for more details.