Grainnet

Overall 2008/09 Grain Transportation Demand Estimated at 1% Less Than 2007/08

This article is reprinted from the USDA's August 28 Grain Transportation Report.

Overall grain transportation demand, based on projected usage of corn, soybeans, and wheat during marketing year 2008/09, is expected to be only 1 percent lower than the unusually strong demand experienced during the 2007/08 crop year.

The projected decline in grain transportation demand is primarily due to a 17 percent decrease in projected exports.

As domestic usage of grain is nearly 3 times exports, a 5 percent increase in projected domestic use nearly offsets the 17 percent decrease in grain exports.

The 17 percent decrease in projected 2008/09 grain exports is due to projected grain production increases in other countries, which will result in increased competition in world grain markets.

For instance, USDA projects world wheat usage to increase by 27.73 million metric tons (mmt), while foreign wheat production is expected to increase by 49.44 mmt and U. S. wheat production is projected to increase by 10.77 mmt.

In contrast, wheat crop failures in other countries during 2007/08, as well as actions by several countries to limit wheat exports, resulted in U.S. wheat exports increasing 39 percent compared to 2006/07.

Projected 2008/09 export sales of corn, soybeans, and wheat are 18, 21, and 13 percent less, respectively, compared to 2007/08.

USDA projects domestic use of corn, soybeans, and wheat during 2008/09 to increase 3, 5, and 21 percent, respectively, compared to 2007/08.

Projected corn use for ethanol is expected to increase 37 percent compared to the prior year, while a 2 percent reduction in the amount of feed needed for animals (USDA, Feed Outlook, August 14) is expected to contribute to a 12 percent decrease in corn used for feed.

Furthermore, the quantity of corn used for feed will be affected by increased competition from other grains due to more competitive prices relative to corn and increased quantities of dried distillers’ grains with solubles available for use as feed because of increased ethanol production.

Projected 2008/09 soybean crush is down 1 percent as tightening supplies are starting to slow demand by domestic processors (USDA, Oil Crops Outlook, August 13).

Projected 2008/09 wheat domestic use is up 228 million bushels (mbu) from the previous year.

Most of the increase is in feed and residual use, mainly due to increased feed and residual use of soft red winter wheat (USDA, Wheat Outlook, August 14).

Projected 2008/09 truck transportation demand for grain is expected to increase 4 percent, while rail and barge grain transportation demand is expected to decrease 2 and 15 percent, respectively compared to the previous year.

The increase in truck transportation demand is driven by increased domestic use of grain, of which trucks move 67, 81, and 50 percent (2000-04 average) of the domestic movements of corn, soybeans, and wheat, respectively.

The projected decreased grain exports during 2008/09 could result in an 18 percent reduction in export demand for rail transportation compared to 2007/08 while increased projected domestic use of grain could result in a 5 percent increase.

Projected reductions in 2008-09 grain exports are expected to affect the demand for barge transportation of grain more than that of the other transportation modes because barge moves relatively small amounts of grain to domestic markets.

For more information, call Surajudeen (Deen) Olowolayemo, USDA, at 202-690-1328.