Two hurricanes hammer the Gulf Coast and agriculture absorbs the blows. Not for a minute do I want to minimize the human suffering involved for the victims of hurricanes Katrina and Rita. My heart goes out to those involved. In fact, here at MFA Incorporated, we furnished two trucks to deliver supplies as well as several tons of cattle feed to the area. And over at our sister cooperative, MFA Oil, they sent a tractor-trailer full of diesel. But these hurricanes couldn't have come at a worse time for agriculture. Right in the middle of grain and fertilizer movement. Agronomists are even speculating that the hurricane-force winds have increased the Midwest's chances of developing soybean rust next growing season.

One of the worst aspects from a financial perspective is that everything is going in the wrong direction. Grain market forces point to high transportation prices. The plant food industry is just shy of chaos. And farmers are waiting until the last minute to decide orders. I can tell you with certainty that growers moving slowly or trying to wait out a market correction are playing with fire. Fertilizer is coming from long distances in this market. Right now at MFA, our plant foods people are working three to six months out. It will be very easy to wait too long and be unable to obtain adequate fertilizer supply. From an industry standpoint, the days are gone of having full warehouses of product waiting idly for orders. Too many market factors demand planning.

From a business standpoint, MFA Incorporated was affected by the hurricanes. Our farm supply division has eight truckloads of sisal twine stranded in a warehouse outside of New Orleans. It is inaccessible as of this writing and its condition is unknown. Our plant foods division lost a barge full of urea. Urea is water soluble. When the insurance adjustors opened the flooded barge, they found—nothing. In another instance, we had 15 railcars of urea caught in the middle of the hurricane. Each and every car sustained significant water damage resulting in a complete loss of product. Our grand total fertilizer loss for just those two incidents added up to 3,000 tons.

Two different barge lines we deal with each lost track of 100 barges. Several weeks after the hurricanes, both barge lines had accounted for all of those barges. Trouble is, many of those barges were in places other than the river and are out of commission indefinitely. Barge freight in October was trading at 800 percent of tariff. There is a tremendous disruption in the grain industry. Loan Deficiency Payments will again be a large factor in farm income. But LDPs are based on historic freight and basis price at the Gulf. Given today's conditions, those LDPs will be below actual cost.

At the Gulf, natural gas prices are again setting records. And U.S. natural gas companies are declaring force majeure or Act of God. That means the companies do not have to honor existing contracts. Translated further, that means all bets are off in the fertilizer market. Given gas and energy costs, there is no sign that nitrogen will go down in the near term. As of this writing, October and November natural gas futures were trading near $14 per million British thermal unit (btu). In 2004, the market average was $5.85. Suppliers tell us that it's a certainty natural gas, during this winter futures market, will trade above $10.

Many farmers are waiting for offshore supplies to drop market prices. It looks to be a long wait. Russian and Middle Eastern suppliers are taking notice of our high prices and will divert ships to the United States. They can supply U.S. demand. But the marketplace cannot respond in a timely fashion. There is no guarantee prices will drop in time for spring fieldwork. Simply put, supply is tight and cost is high. All indications that we're getting say nitrogen prices will stay high through the Midwest's spring planting season. World supply and demand drive prices in the fertilizer market. You can argue that's a good thing or a bad thing. But regardless of your position, market forces affect fertilizer price. Last year world fertilizer demand increased 13 percent, nearly equivalent to the total use in the United States. According to The Fertilizer Institute, over the last four years, world nitrogen demand has grown 10 percent, phosphate demand by 13 percent and potash demand by 25 percent. From a company standpoint, we will adjust and maneuver and fight our way through this and provide you with the best price and supply that we can negotiate with the industry.

As a result of all this fertilizer volatility, many producers are thinking seriously of switching from corn to soybeans. It's a rational thought considering today's prices. But is it the right move? Despite what anyone tells you, only next year's crop conditions, harvest and prices will prove whether the decision is correct or not. Agronomists worry that the two hurricanes in places with confirmed cases of rust have provided just the right conditions to spread rust further north. If that occurs, all soybean bets are off.

Of course, from a selfish standpoint, I want producers to plant corn. The reason I do is simple. We have a new corn selection called MorCorn that we expect to be an excellent product. We expect sales of MorCorn to be substantial. But seriously, MFA is a cooperative dedicated to serving its members. When our members prosper, so do we. Let's just hope we all navigate this treacherous fall safely.