Market Matters Blog

Grain inspections at the Mississippi Gulf increased by 24% for the week ended November 14, according to USDA's latest Grain Transportation Report. Of that total, soybeans inspections accounted for an increase of 15% from the prior week with corn up 45%. USDA reported for the week ended November 16, the total amount of grain moving on barges was 862,110 tons, which was up 9.2% from the previous week and 36.2% higher than the same time frame last year. For the same week, a total of 549 grain barges moved down river and 947 barges unloaded in New Orleans, which was up 1.4% from the prior week. Grain vessels loadings in the U.S. Gulf during the week of November 14 continued to be strong with 56 ocean going vessels loaded, which was 27% higher than last year at this time. During the next 10-day period, USDA reported 68 vessels are expected to load, which is 58% more than the same time last year and per USDA, "is the highest amount loaded since three years ago at the same time."

As a reminder, at this same time last year the Mississippi River was experiencing dangerously low levels due to drought. At this same time last year, the American Waterways Operators and Waterways Council were asking Congress and the administration to request that the Army Corps of Engineers begin removal of the rock formations near Thebes sooner than their planned start date of February 2013. With the rocks already protruding from the river, there was fear there could be serious damage to barges and more closures on the Mississippi River as the water levels continued to fall. Work did begin December 16 with the first phase of the most critical rock removal near Thebes, Ill., completed around January 13 of this year. While the rock formations are currently not hazardous to barge navigation, the Corps will begin phase two of the operation next month. The project is expected to last four to five months and the Corps does not expect any major traffic delays. The Corps has determined that continuing the project will be beneficial should the water levels drop to dangerous levels in the future.

While river levels did improve with spring rains and snow causing lock closures due to flooding in some spots, low water levels did cause some headaches this fall. According to USDA, water levels in St. Louis rose above flood stage in the spring, but by late summer levels dropped to below average, falling below 5 feet. When water levels remain above 5 feet, barge drafts will stay at normal levels. Once the water drops below 5 feet, barges need to lighten their load, which increases the cost of moving grain. Water levels below zero gauge, like we saw during last year's drought, can cause serious consequences for navigation through locks and down river. The Mississippi River at St. Louis is currently at 2 feet above zero gauge and is expected to rise to 3 feet by the middle of next week. Unless more moisture replenishes the river, water levels could remain low throughout the winter. Water levels typically decrease in December when the Corps decreases the flow of water from the Missouri River between December and February.

BARGE FREIGHT, RAIL COSTS LOWER

Barge freight on the Illinois River was down 6% for the week ended November 19, compared to the week prior. Barge freight on the Illinois was 8% higher than the same time last year and 34% higher than the three-year average. Freight in the Ohio River corridor dropped 300% from one week ago after a slowdown for repairs at Lock 52 stalled barge traffic on both sides of the lock. Shippers were desperate for empty barges to meet November grain contract commitments, causing the spot price to rise sharply between November 6 and November 14.

The bids/offers in secondary rail freight market were lower after reaching historical high prices in October due to a shortage of empty cars. For the week ended November 14, average non-shuttle secondary railcar bids/offers per car for November were down $100 from the prior week at $425 above tariff. The average shuttle bids/offers were down $625 from the prior week at $500 above tariff. The bids/offers for December non-shuttle freight were $675 lower than the prior week at $300 per car with shuttles down $454 at $96 per car above tariff. Elevators have reported there was an increase in empty car placements in the past 10 days which has taken pressure off secondary freight prices. USDA's Grain Transportation Report stated, "Despite the sharp drop (in the rail freight market) the last two weeks, all bids/offers remain above three-year average bids/offers."