This article has been reprinted from the Nov. 1 USDA Grain Transportation Report.
The 2018/19 corn and soybean harvests are showing a reversal of transportation movements from the patterns of recent years.
For the first time in seven years, corn exports overtook soybean exports during the first two months of the marketing year, marked by a steep drop in soybean exports to China.
The shift in exports has changed the routing of some grain and oilseed movements to open additional storage and transportation capacity during this year’s harvest, which may temporarily help boost the competitiveness of U.S. corn exports this year.
Soybean and Corn Outlook
Although persistent wet weather has slowed the pace of the soybean harvest, USDA estimates soybean production this year could be the largest ever recorded.
Combined with the record-high carryover from last year (Grain Transportation Report 10/11/18), this year’s soybean supplies could reach a record high of 5,153 million bushels.
USDA also estimates record corn supplies, at 16,968 million bushels, due to near-record corn production.
The movement of this year’s grain harvest has not yet fully materialized on the rail and barge networks.
With record export corn sales during the last marketing year, weekly grain carloadings were above the prior 3-year, 4-week average from April to September (GTR Figure 3).
Similarly, weekly barge movements of grain trended near or above the 3-year average during the same period (GTR Figure 10).
However, beginning in October 2018, both rail carloadings and barge movements of grain have fallen well below their 3-year averages.
The October edition of USDA’s Oil Crops Outlook reported that changing export destinations for soybeans have caused initial export sales and shipments to be slower than usual and may shift a higher percentage of export sales into the second half of the 2018/19 marketing year.
Given the pace of corn exports in recent months and the strong pace of recent sales and shipments, USDA’s Feed Outlook in October reported corn exports during 2018/19 are expected to be 2,475 million bushels, which would exceed the previous year’s record of 2,438 million bushels.
The report also indicated the increase in the U.S. share of world corn exports is being helped by decreased Russian corn production, increased sales to Mexico, strong global demand, and record-high supplies.
In addition, adequate capacity and lower rates across the transportation network may help contribute to the price competitiveness of U.S. corn exports relative to other countries.
Typically, once harvested, soybeans destined for export are moved by rail and barge as quickly as possible while corn and other grain are kept in storage, due to the characteristic soybean marketing advantage enjoyed by the United States between October and February before the Brazilian crop is harvested.
In addition, soybeans are more sensitive to spoilage over the long-term compared to corn and other grains.
The post-harvest seasonal demand for moving soybeans is characterized by higher transportation rates as shippers seek available capacity on the rail and barge network.
However, while straining storage capacity, the recent downward shift in soybean exports has increased available transportation capacity for corn and other grains during this year’s harvest.
The additional transportation capacity has been partially reflected by relatively adequate availability of barges.
Despite navigation disruptions caused by highwater conditions, average October barge rates for export grain, at major originating locations, are roughly 9 to 21 percent below the 5-year average.
Cumulative rail carloadings of grain during the past 4 weeks are 8 percent below last year and 5 percent below the 5-year average.
The 4-week average of secondary shuttle bids in October is 79 percent below last year and 94 percent below the 5-year average.
Interestingly, the reverse has been true for non-shuttle movements compared to last year, with the 4-week average of secondary non-shuttle bids in October 67 percent above last year, but still 75 percent below the 5-year average.
This may be due to new transportation patterns mentioned previously.
Change in Export Ports
Decreased soybean exports have been partially offset by increased corn exports at many export locations, which has changed transportation demand for export corn and soybean movements.
During September and October, corn exports increased 71 percent, while soybean exports decreased 40 percent compared to the previous year.
On average, barges account for about 94 percent of corn and 88 percent of soybean deliveries for export through the Mississippi Gulf, and railroads account for almost all corn and soybean deliveries for export through the PNW.
During September and October, exports of corn increased 1.8 million metric tons (mmt) from the Mississippi Gulf, but exports of soybeans decreased 2.5 mmt from the Mississippi Gulf from the same period last year.
Given the net change, the total demand for corn and soybean transportation capacity to the Mississippi Gulf fell by 0.7 mmt, with a 0.5 mmt net decrease for barge and 0.2 mmt net decrease for rail.
This translates into roughly 13 fewer 15-barge tows and 10 fewer 100-car shuttle trains, per month, delivered to the Mississippi Gulf.
In contrast, exports of corn during September and October increased 1.9 mmt through the PNW, but exports of soybeans decreased 2.1 mmt through the PNW compared to the same period last year.
The Pacific Northwest accounted for 6 percent of corn exports and 25 percent of soybean exports during this period last year.
This year it accounts for 25 percent of corn exports and 13 percent of soybean exports.
Given the net change, total demand for corn and soybean transportation capacity to the PNW has fallen by roughly 0.2 mmt, about 10 fewer 100-car shuttle trains per month.
Exports of both soybeans and corn have been higher in September and October through the North Atlantic and Great Lakes, due to different export destinations and a higher number of destinations, compared to last year.
Most of the additional supply to these locations has been by rail.
This may account for some of the higher non-shuttle rates since these locations are not typical export destinations for grain by rail.
Both soybeans and corn are projected to have record high supplies during the 2018/19 marketing year.
However, the supply of rail and barge for grain and oilseed transportation has been adequate, so far, during the harvest.
If the projected record amount of corn exports materializes, demand for grain transportation during the 2018/19 marketing year could be like last year.
In addition, a shift in soybean exports to the second half of the marketing year could also create above-average demand for transportation later this year and early next year, compared to previous years.