The National Oceanic and Atmospheric Administration’s outlook for one of the more active hurricane seasons on record — exceeding their initial forecasts for 2005 when Katrina wreaked havoc on the Gulf coast — likely brought shivers to U.S. sugar users and cane processors, as well as to the Florida citrus industry and to Gulf energy companies.
Disruptions to Florida and Gulf sugar operations may be especially dramatic with current sugar prices already 4c a lb above the post Katrina spike in 2005 and supplies seen tight until October.
“The 2010 Atlantic hurricane season is expected (with 70% chance) to produce 14 to 23 named storms, 8 to 14 hurricanes and 3 to 7 major hurricanes,” the N.O.A.A. said in its May 27 outlook. That compares with the 2005 outlook of 12 to 15 storms, 7 to 9 hurricanes and 3 to 5 major hurricanes. The final tally in 2005 was a record 27 named storms, a record 15 hurricanes and a near-record 7 major hurricanes (including a record 4 category 5 hurricanes), according to N.O.A.A. records. Seasonal averages are 11 named storms, 6 hurricanes and 2 major hurricanes.
“If this outlook holds true, this season could be one of the more active on record,” said Jane Lubchenco, undersecretary of commerce for oceans and atmosphere and administrator for the N.O.A.A. “The greater likelihood of storms brings an increased risk of landfall.”
The Atlantic hurricane season officially runs from June 1 through Nov. 30 with August-October typically the most active period. The area includes the Gulf of Mexico, the Caribbean Sea and the North Atlantic Ocean.
The 2010 season arrives with an already-heightened concern about the Gulf oil slick, which the N.O.A.A. said would not affect a hurricane, but which may be affected by a hurricane. On the good side, high winds and seas will mix the oil, which may accelerate the biodegradation process, the N.O.A.A. said. But on the negative side, the oil may be carried into the coastline and farther inland in the case of a surge (especially if a hurricane passes to the west of the slick because of the storm’s counterclockwise rotation).
In addition, disruption to crude oil and natural gas operations may significantly impact availability and pricing. In 2005, average retail diesel prices rose $1 a gallon, or 46%, from an early summer low of $2.16 to a high of $3.16 by the end of October. The national average diesel price last week was $2.98 a gallon, according to the Energy Information Administration. Natural gas prices in 2005 more than doubled from a low near $6.35 per million BTUs to $14.67 in late October, with prices currently around $4.20.
But the impact was even more dramatic on sugar in 2005 when Katrina put two major Louisiana cane refineries out of operation, one only briefly but another for several months. The result was an 80% spike in bulk refined sugar prices, from 25c a lb in early summer to about 45c by mid-September. Bulk refined sugar last week was offered at 49c a lb with supplies tight. With traders indicating cane
refiners as about the only source of uncommitted supply to sell before new crop beet sugar becomes available around Oct. 1, any disruption to cane refining operations may send prices to atmospheric levels or result in an actual shortage.
“A hurricane could be devastating,” one sugar trader said last week.
For citrus, hurricanes may damage Florida groves, which they did as recently as 2004-05 and 2005-06, significantly affecting the main supply of U.S. orange juice. Although the 2009-10 Florida orange crop, which was 19% smaller than the 2008-09 crop due to January freezes, was mostly harvested, losses may affect the developing 2010-11 crop and juice output. U.S. orange juice production in 2009-10 was forecast to be the lowest in 20 years. The first 2010-11 orange crop forecasts will be issued by the U.S. Department of Agriculture on Oct. 8.
It should be noted that many seasonal hurricane forecasts, both government and private, have missed their marks in recent years, with some traders going so far as to call them “worthless.” The N.O.A.A. hit the mark with an outlook for an active season in 2005 (activity actually exceeded the outlook), but it missed in 2006, forecasting a very active season, and again in 2007, with an above normal outlook, with storms in both years below expectations. The N.O.A.A. called for near normal hurricane seasons the past two years, which have been closer to the actual outcomes.
The energy, citrus and sugar industries and users may only hope meteorologists are wrong again in 2010.