Hurricane Harvey halts trains, the export of Nebraska commodities with harvest looming | Money

When the weather hits as hard as Hurricane Harvey did in Houston, business gets disrupted, and the aftershocks are being felt almost 1,000 miles away in Omaha.

The flooding and closure of the Port of Houston have brought a stop to train operations in the area by Omaha-based Union Pacific and BNSF Railway, owned by Omaha’s Berkshire Hathaway.

Exports of key Nebraska commodities such as ethanol and hard red winter wheat — heavily dependent on the Port of Houston for shipment — are on standby. Corn and soybeans would begin backing up if the port doesn’t open in time to accommodate exports of the fall harvest.

Hurricane Harvey has deluged Houston and surrounding areas, with some zones getting more than 50 inches of rain in five days, or more in that time frame than in an entire normal year. Houston is inundated, with more than a dozen dead, thousands of people rescued from flooded neighborhoods, and many more awaiting aid.

On the commerce side, the city and its Gulf of Mexico port are synonymous with U.S. economic development; the port is one of the busiest in the nation and a major handler of petroleum products. But for now, the rail lines are out, the port terminals are flooded, and the Houston Ship Channel is closed to all maritime traffic.

The area’s business ties to Nebraska are substantial:

» Union Pacific, the nation’s second-largest freight railroad and employer of 8,000 people in Nebraska, operates a vast network of tracks and terminals in Texas. In the Houston area, it has three terminals capable of handling containers coming in or going out by ship that are also hauled on trucks for part of their journey. All operations were halted Saturday, and remain suspended, spokeswoman Calli Hite said, “out of concern for employee, community and customer safety.”

» BNSF Railway is also a major rail hauler in Texas, employer of 5,000 people in Nebraska with its own network of lines and terminals in the Lone Star State, including an intermodal yard handling vehicles and truck/train/ship containers in Houston. Spokeswoman Amy Casas said this week that some locations in the area have received nearly 40 inches of rain and several more inches were expected Wednesday.

“With multiple washouts and high water reported on BNSF main lines in the area, all traffic destined to and originating from Houston has been suspended,” Casas said.

» Omaha’s Berkshire Hathaway also owns insurer Geico, and Chief Executive Warren Buffett said in a television interview Wednesday that he expected 50,000 of the roughly 500,000 vehicles Geico insures in the area to be total losses.

» Omaha-based trucker Werner Enterprises does a lot of business in Texas, with a terminal in Laredo, about 300 miles from Houston. Spokesman Fred Thayer said the company began routing drivers away from Houston on Saturday.

“At this time, the long-term effects of the storm are unknown,” Thayer said.

» The Port of Houston handles about 40 million gallons of Nebraska ethanol a year destined for export — the most from any one ethanol-producing state, according to a University of Nebraska-Lincoln analysis. With the port possibly out of commission for weeks, bottlenecks are likely, economists say. Ethanol exports are a growing part of the business for producers in Nebraska, the second-largest producer of the corn-based motor fuel. Major customers include Brazil.

“Exports of ethanol are critical to Nebraska,” said Geoff Cooper, a vice president with the Renewable Fuels Association. “About 8 percent of U.S. production is exported, and while it may not sound like a lot, it is an important amount that can mean all the difference when it comes to profitability.”

» Omaha-based Green Plains Inc. is building an ethanol export terminal in nearby Beaumont, Texas, capable of storing and exporting the commodity for producers, including itself, which is the nation’s second-largest. Spokesman Jim Stark said the terminal is on high ground and has sustained no damage.

He also said all shipments in and out of Houston and New Orleans will be backed up for some time, and switching ports isn’t a snap.

“Products are not easily transferred between ports,” Stark said. “We know the Coast Guard is working to get the Houston ship channel cleared and functioning. Railroads are backed up going to both port areas, so this may take some time to work itself through.”

» The Port of Houston and other Texas ports have been handling about 70 percent of hard red winter wheat headed for export, said Bill Lapp, of Omaha commodities consultant Advanced Economic Solutions. And hard red winter wheat accounts for most of Nebraska’s wheat crop, according to the Nebraska Wheat Board.

“Expect some disruption for wheat exports,” Lapp said. “For the coming weeks and potentially months, business will be diverted to other ports, primarily New Orleans, or simply delayed. Longer-term it may not have much impact, but short-term disruptions will be dramatic.”

» Omaha-based grain trader Gavilon has fertilizer terminals in Corpus Christi and Victoria, Texas. Spokesman Patrick Burke said they “suffered very little damage, and we expect both will be back in operation in the next few days or early next week.”

» Scoular, another Omaha grain trader, doesn’t have any grain elevators in the affected areas, said Chief Executive Paul Maas. But he said “business disruption as a result of this storm is certain.”

Maas said the biggest fallout will be shippers scrambling to find rail transportation for grain destined for the Gulf Coast, with harvests looming for both corn and soybeans.

“Wheat and milo shipments from ports in Houston and Corpus Christi are delayed, and future shipments to those ports will be rerouted until floodwaters recede and damage to grain elevators and transportation infrastructure can be repaired,” Maas said. “We’ll be keeping a close eye on the situation, particularly with feed grain harvest right around the corner.”

The Omaha World-Herald is owned by Berkshire Hathaway.

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