Risk Rap

Rapping About a World at Risk

Eco and Econ Hardship of the Iowa Floods

Just when the price of corn was hitting $7 a bushel, Iowa’s farmers were counting on making a killing this year. The rise in the price of agricultural products due to increased global demand was one of this years few favorable economic developments that farmers were looking to capitalize on. Unfortunately Mother Nature threw them an awful curve ball and wiped out many farms that abutted the angry rivers of the Midwest. The loss of 10% of the states corn yields, has also hurt soybeans and other crops. Though it will certainly drive prices even higher, for the farmers whose fields are underwater , this year will bring financial hardship not abundance as some have thought only a week or two ago.

Longer term the floods destruction may also significantly damage soil and water quality due to the spread of toxins, hazardous waste, dead farm animals and other industrial pollutants rippling through the farmlands as the flood spreads. If 10% of the areas farmland is affected this will command a premium on agricultural futures for years to come.

Eventually, the flood waters will drain off from the once rich arable soil, carrying with it all the fertilizers, petroleum by products and other effluents into the Mississippi River. As it passes New Orleans it won’t be far from its final destination where it can cause considerable damage to the waters of The Gulf of Mexico and its struggling aquaculture and fishing industries.

The Army Corps of Engineers has issued 13 million sandbags. Those sandbags will have to be hand filled. The amount of labor, energy and resources expended to fill those bags in a valiant struggle to buttress failing levee systems is a testament to the American spirit to endure.

As we tally the awful cost of this catastrophic event lets be mindful that investment in our infrastructure is a critical issue that is central to our national defense. I can’t help but think what a wise decision a $2 billion investment in levees would have returned to this country in saved expense and opportunity cost. The old adage that an ounce of prevention is worth a pound of cure is sure sage advice that unfortunately we always seem to dismiss as a meaningless cliche.

We’ll close this post with a favorite from the old Granges of the Midwest.

Let’s listen to Woody Guthrie sing “This land is Your Land.”

Risk: infrastructure, agriculture, aquaculture, water, Mississippi River, Gulf of Mexico, inflation, arable land, crop yields

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June 18, 2008 Posted by | environment, folk, homelessness, infrastructure, risk management | , , , , , , , , , | Leave a comment

Tallying the Cost of the Iowa Flood

Thomas Hart Benton

As the flood waters in Iowa drain southward to its destination in the Mississippi River, new sites and new cities are threatened by levee systems that cannot cope with the extraordinary scope and power of nature’s wrath.

Insurance companies will give estimates about the extent of the dollar damage the flood has claimed. The number I have seen for Cedar Rapids is $700 million. I don’t know how they derive that number. I believe it to be replacement value of insured property and assets of insurance in force. That’s a big number but it does not account for uninsured property, loss of potential income from jobs and small business revenue, loss of municipal tax revenue and the intangible but very real cost of lost opportunities due to the allocation of time and treasure to rebuild and repair damaged and lost assets.

CNN this morning was reporting that The University of Iowa assembled a rescue party to recover $400 million worth of art from its famous museum located in one of its flood ravaged buildings. For all intents and purposes the Hawkeyes campus is shut down and some believe that a number of buildings cannot be salvaged. How do you put a price on learning? How will this effect the decision of prospective students to choose the University of Iowa for their college education? What impacts will this have on the precarious economics of state funded college institutions?

Though we can easily see how Iowa is burdened with the extraordinary financial cost of this terrible event, all Americans will be impacted as a result of this flood. For example, railroads have scaled back schedules due to flooded lines. This will impact commerce of businesses waiting for deliveries and sellers looking to complete the book to bill cycle.

Something that will become more apparent as the summer progresses is the toll the flood will have on rising corn prices. Due to crop destruction it is estimated that the price of corn will rise by 9%. This is a cost that all American’s will unfortunately share equally and will only exacerbate the problem of rising inflation.

When the levee breaks you got no place to stay and escape the harm of this costly flood.

Risk: agricultural futures, municipal finance, transportation, infrastructure, University of Iowa, inflation, opportunity cost, fine art

June 16, 2008 Posted by | commodities, community, economics, environment, folk, infrastructure | , , , , , , , , , , , | Leave a comment