January 2018 Grain Transportation Update

This article has been reprinted from the Jan. 18 USDA Grain Transportation Report.

Following the trend of the past four years, large grain and oilseed harvests continued in 2017 with a record soybean harvest and near record corn harvest. 

Cumulative annual production at record levels has outstripped demand, causing grain stocks to be at their highest level in the past 30 years. 

High stocks may increase demand for grain transportation in 2018. 

In 2017, grain rail carloads and barge tonnages remained strong but were down 3 percent and 5 percent from 2016 levels, respectively. 

Grain (wheat, corn, and soybeans) inspected for export from all major U.S. ports reached 132 million metric tons in 2017, 4 percent below last year and 18 percent above the 5-year average. 

Despite a slight reduction in exports, ocean freight rates were higher in 2017, which continued into 2018 as overall demand for ocean freight has been strengthening.

Projected Grain Production and Exports Down from Last Year

According to the January World Agricultural Supply and Demand Estimates (WASDE) report, USDA forecast 2017/18 crop production to reach 20.7 billion bushels (bbu) for corn, soybeans, and wheat, down 4 percent from the past year (Table 1). 

In the report, USDA projected increased corn and wheat supplies (production and imports) and decreased use (food, feed, industrial, exports, etc.) of these crops over their respective marketing years compared to the December report. 

USDA lowered its forecast of 2017/18 soybean supplies and use compared to last month’s report. 

Total use of corn and soybeans for the 2017/18 marketing year (September 2017 through August 2018) is estimated to be 18.7 bbu, 1 percent less than

last year. 

Consistent with crop patterns in previous years, USDA expects most corn (87 percent of total use) to be used domestically and 51 percent of soybeans to be
exported in 2017/18.

USDA projects total grain exports to reach 5.1 bbu for the 2017/18 marketing year, down 8 percent from last year. 

Projected exports of corn and soybeans are expected to decrease 16 and 1 percent, respectively, from last year, and wheat exports are forecast to decrease 8 percent. 

Outstanding (unshipped) export sales for the three major grains are currently down 17 percent from last year and 5 percent below the 4-week average (GTR Table 12).

Based on USDA’s projections for exports and domestic use, transportation demand for grain may continue to drop for corn, but remain more stable for soybeans and wheat.

Grain Carloads by Rail and Train Speeds Down in 2017

Despite a strong first half of the year following a record harvest in 2016, grain carloads in 2017 fell below previous years. 

Total U.S. grain carloads in 2017 reached 1.3 million carloads, down 3 percent from 2016, but up 2 and 3 percent from 2014 and 2015, respectively.

Lower grain carloads in 2017 also came with slower service. 

Performance data submitted by Class I railroads to the Surface Transportation Board show that the average train speeds for all car types was down 4 percent in 2017 compared to 2016. 

Grain unit train speeds declined 6 percent. In addition, the average terminal dwell time across all reported locations increased by 7 percent. 

One factor that was likely behind these trends was changes in total rail
traffic. 

Total traffic was low in 2016 due to significant declines in coal carloads compared to previous years. 

In 2017, increases in coal, and especially container traffic, brought total traffic nearly back to the 2015 level. 

Total traffic was down 5 percent in 2016 compared to 2015, but rebounded 4 percent in 2017.

In January, weekly average shuttle rates in the secondary railcar market have ranged $200 to $850 lower than last year.

However, rates have been generally increasing over the past four weeks, indicating stronger demand to secure grain shuttle service during January and February. 

This week’s average January shuttle rate of $275 per railcar is the highest weekly average since the October shuttle rate of $388 during the week of October 12, 2017 when the harvest was fully underway.

Grain Barges Tonnages in 2017 Above Average

For 2017, annual grain barge tonnages through the locking portions of the Mississippi, Ohio, and Arkansas Rivers were 40.9 million tons, 8 percent higher than the 3-year average but 5 percent lower than the 43.2 million tons moved in 2016. 

This was the second highest annual tonnage since 2003. 

Throughout 2017, significant weekly fluctuations of grain shipments occurred due to lock and dam repairs or high water conditions that delayed traffic temporarily but caused increased traffic afterward (figure 1). 

Despite frequent periods of unfavorable navigation conditions, spot grain barge rates were almost consistently below average during 2017. 

However, significant ice accumulations on the Illinois River have increased rates to above-average levels since the beginning of 2018. 

GTR Figure 8 shows the Illinois River barge rate for export grain was above
the 3-year average four times in the last 52 weeks.

Dry-Bulk Ocean Freight Rates Up

Ocean freight rates for shipping bulk commodities, including grain, rose during 2017 (figure 2). 

As of January 11, the cost of shipping grain through the U.S. Gulf to Japan was $44.75 per metric ton (mt)—28 percent more than a year ago. 

The cost of shipping from the Pacific Northwest to Japan was $24.50 per
mt—38 percent more than last year. 

The rise in ocean rates during the year was partly due to strong coal and
iron ore imports by China, as well as strong grain exports and grain vessel loading activity in the U.S. 

In 2017, wheat, corn, and soybeans inspected for export from all major U.S. ports reached 132 million metric tons—4 percent below last year and 18 percent above the 5-year average.

Diesel Prices Up in 2017

According to the latest Short-Term Energy Outlook by the Energy Information Agency (EIA), the retail price for diesel fuel averaged $2.65 per gallon in 2017, which was 34 cents higher than in 2016. 

EIA forecasts diesel prices to average $2.95 in 2018 and $3.01 in 2019, driven higher primarily by higher crude oil prices and growing global diesel demand.

As of the week ending January 15 (GTR Table 11), diesel prices have continued to increase, averaging $3.03 per gallon in retail sales. 

During the last three years, national averages fluctuated between $1.98 and $3.05.

December Grain Stocks

Data released last week on December grain stocks from (NASS) shows the volume and location of grain available to move in the supply chain. 

According to USDA’s National Agricultural Statistics Service, total grain stocks across the United States—including barley, corn, grain sorghum, oats, soybeans, and wheat—were 18.0 billion bushels (bbu) as of December 1, 2017, 8 percent above the prior 3-year average and the highest level in the past 30 years. 

This year’s December grain stocks were slightly above 2016, 1 with year-over-year growth of 1 percent in corn stocks and 9 percent in soybean stocks. 

Approximately 9.7 bbu (54 percent) of the grain was held in on-farm storage as of December 1 (with the remainder in commercial storage), suggesting a sizeable amount of grain has yet to enter the major grain marketing channels.