Market Matters Blog
Five Lock and Dam Closures on Illinois River Looming
The Illinois Waterway, which provides a navigable connection between Lake Michigan and the Mississippi River, includes eight lock and dam sites that are long overdue for significant repairs. In order to facilitate repairs, the U.S. Army Corps of Engineers, (USACE/Corps) Rock Island District developed a consolidated repair schedule that included a short closure to locks in 2019, followed by two extended closures in 2020 and 2023. The closures are scheduled to take place simultaneously to lessen the impact to commercial navigation as much as possible.
The current 9-foot channel lock and dam system on the Illinois River was built in the 1930s with an estimated life span of 50 years. "The structures have long outlived their life expectancy but continue to operate 24/7 due to the hard work and dedication of the men and women charged with maintaining the structures," USACE noted. "Nearly half of the District's employees are involved in some part of the maintenance or operation of the lock and dam and navigation system."
On their website, the Corps notes that all lock and dam facilities on the Illinois Waterway have a single lock chamber for passing vessels. "During the scheduled closures, no vessels will be able to pass through the affected locks. An exception to this restriction could occur at the LaGrange and Peoria locks if water levels become high enough that the wicket portions of the dams could be lowered for open-pass. This would allow vessels to pass around the dam without using the lock. There is no guarantee river levels will be high during the closures."
Here is the USACE schedule detailing what Locks and Dams will be closing in July:
*NOTE: Projects and dates listed on this schedule are subject to change due to river levels and project funding.
-- LaGrange Lock and Dam -- Major Rehabilitation and Lock Machinery Replacement: Full closure scheduled July 1-Sept. 30.
-- Peoria Lock and Dam -- Dewatering for Maintenance and Inspection: Full closure scheduled July 6-Sept. 30.
-- Starved Rock Lock and Dam -- Upper and Lower Miter Gate Installation: Full closure scheduled July 1-Oct. 29.
-- Marseilles Lock and Dam -- Upper Miter Gate Installation: Full closure scheduled July 6-Oct. 29.
-- Dresden Island Lock and Dam -- Upper Bulkhead Recess Installation: Partial Closure scheduled July 6-Oct. 3 and Oct. 25-28. *Locks operational from 6 p.m. to 6 a.m. with a 70-foot width restriction and no ability to pull unpowered barges. Full closure scheduled Oct. 4-24.
No vessel traffic will be allowed through the affected locks, which means barges that normally carry agricultural commodities through those locks will be at a standstill. The repairs were scheduled by the Corps during the months of July through October to avoid spring flooding and to eliminate an impact during harvest season when barge traffic is heaviest.
Basis for corn and soybeans moving on the Illinois River ahead of the closure has been stronger as shippers scrambled to get barges loaded out and released ahead of the dates specified by barge lines to ensure barges moved past the affected locks scheduled for closure.
There are no barge freight values quoted on the Illinois River for July through October since barges will be unable to move upriver through the closure. Barge freight for new crop moved higher recently, especially on the Illinois River, but it is not unusual for freight to increase at harvest time when demand is greater.
CME CORN AND SOYBEAN FUTURES DELIVERY RULES DURING CLOSURE
All Illinois River terminals that are "regular" for Chicago Board of Trade corn and soybean futures delivery and are situated upriver from the closure will be affected.
In a June 5 notice, the CME Group stated, "The Board of Trade of the City of Chicago, Inc.'s ('CBOT' or 'Exchange') physically delivered Corn futures (Clearing Code: C; CME Globex Code: ZC; Rulebook Chapter 10) and Soybean futures (Clearing Code: S; CME Globex Code: ZS; Rulebook Chapter 11) contracts (the "Contracts") load-out rules and procedures for affected regular facilities will be altered during this time.
"Delivery in the CBOT Corn and Soybean futures contracts is along a 403-mile section of the Illinois and Mississippi Rivers from terminals in Chicago, Illinois, and Burns Harbor, Indiana, south to St. Louis. CBOT Rulebook Chapter 7 establishes barge load-out procedures that apply when grain transportation is adversely affected on the Illinois River."
The CME pointed out that Rule 703.C.G.(8) establishes load-out procedures for issues that adversely affect a delivery facility's ability to load, including load-out procedures for officially announced closures that affect a minority of delivery facilities. Rule 703.C.G.(9) establishes load-out procedures for officially announced closures that affects a majority of delivery facilities for a period of 15 days or longer.
The closure will encompass three delivery timeframes for soybeans and two for corn.
I spoke with a representative in the communication department at CME and asked him if, at any time during the closure, it is possible a Force Majeure Rule 701 may be declared. He told me: "The Exchange will have alternative load-out procedures in place for affected facilities during the river closure. While the possibility of a force majeure may exist depending upon the circumstances in place at that time, we believe that the existence of alternative load out procedures would mitigate this possibility."
Here is a link to the CME Delivery and Load-Out Information for Physically-Delivered Corn and Soybean Futures Contacts During the Planned July 2020 Through October 2020 Lock Closures on the Illinois River: https://www.cmegroup.com/…
Delivery dates affected for corn futures: https://www.cmegroup.com/…
Delivery dates affected for soybean futures: https://www.cmegroup.com/…
Mary Kennedy can be reached at email@example.com
Follow her on Twitter @MaryCKenn
© (c) Copyright 2020 DTN, LLC. All rights reserved.
To comment, please Log In or Join our Community .