This article has been reprinted from the Feb. 21 USDA Grain Transportation Report.
Grain stocks were at record levels near the end of 2018.
Corn stocks were down 5 percent from 2017, but soybean and wheat stocks were up 18 and 7 percent, respectively.
Grain storage is an important link between agricultural production and transportation demand.
During the summer (wheat, barley, and oats) and fall (corn, soybeans, and sorghum) harvests, grain fills up storage bins from which it is sold throughout the remainder of the year, generating transportation demand.
In this article, we look at 2018 quarterly grain stocks snapshots to understand recent trends in transportation demand and to glean insight about transportation demand to come in the first half of 2019.
A Look Back: September through November 2018 USDA’s National Agricultural Statistics Service (NASS) provides data on the inventory of grain in storage (i.e., stocks) as of four points during the year: March 1, June 1, September 1, and December 1.
Since these dates match quarterly periods in the crop marketing year, the data can be analyzed period-to-period to better understand grain flows in and out of storage.
The United States held sizeable grain stocks in early September, and subsequently harvested the third largest corn crop and a record volume of soybeans.
Both contributed to substantial supplies of grain in the fall, to enter either storage or shipping channels (October 11, 2018 Grain Transportation Report (GTR)).
NASS’ December 1, 2018 stocks data released earlier this month suggest aggregate grain movements from September through the end of November 2018 were on par with previous years. More specifically, grain “disappearance”—the difference between fall grain supplies and grain stocks as of December 1, 2018—was 6.4 billion bushels (bbu), down 1 percent from last year and the prior 3-year average.*
Earlier research (November 1, 2018 GTR) highlighted a shift in movements by commodity, particularly for corn and soybeans.
According to NASS “disappearance” data, this different pattern for corn and soybeans continued.
While wheat movements over this three-month span remained relatively unchanged (down 1 percent from a year ago), corn movements were up 6 percent and soybean movements were down 20 percent.
Compared to soybeans, corn has a much higher ratio of domestic to export use.
Therefore, the change in the crop mix of disappearance from soybeans to corn tended to increase domestic movements and, in turn, increase truck movements.
Corn and wheat inspections for export in the fourth quarter of 2018 (Oct-Dec) were up 229 and 46 million bushels (mbu) from the previous year, respectively.
At the same time, soybean inspections were down 424 mbu.
Total grain inspections were down 187 mbu.
Unchanged disappearance, with lower exports, implies an increase in domestic movements.
While truck movements of grain are not directly observable due to data limitations (especially at the weekly or quarterly frequency required in this analysis), they may be inferred from looking at rail and barge shipments.
Grain tonnages down the Mississippi River in September, October, and November were 12 percent lower than last year and 16 percent lower than the prior 3-year average.
Calendar year fourth quarter rail carloads were down slightly, as well.
Since total disappearance is about even, it suggests the modal movement of grain by truck expanded its share.
A Look at the Present and Outlook December 1 grain stocks totaled 18.2 bbu in 2018.
The record year-end grain stocks will, all else equal, serve to strengthen transportation demand throughout the first half of 2019 compared to previous years.
The timing of demand is difficult to predict, but the share of ending stocks that leave storage by September 1 is relatively consistent at around 70 to 75 percent.
It is worth noting that, despite the shift in the commodity mix of disappearance between September and December, corn still represented by far the largest share of December 1 stocks, at about 66 percent, with soybeans and wheat representing 21 and 11 percent, respectively.
The location of grain stocks can shed some light on the geography of transportation demand. By December 1, 2018, the five states with the highest grain stocks were Illinois (2.79 bbu), Iowa (2.71 bbu), Nebraska (1.81 bbu), Minnesota (1.73 bbu), and Indiana (1.19 bbu). The top 5 states by change in December stocks from last year were Minnesota (down 192 mbu), Iowa (down 162 mbu), Ohio (up 147 mbu), Illinois (up 118 mbu), and Indiana (up 101 mbu).
On February 8, USDA released the latest World Agricultural Supply and Demand Estimates report for 2018/19 marketing year.
Total corn, soybean, and wheat use (which includes food, feed, exports, and other uses) is projected up 66 mbu, down 205 mbu, and up 133 mbu, respectively, from last year—a net decrease of about 6 mbu for the three commodities.
Corn, soybean, and wheat exports are projected to be up 12 mbu, down 254 mbu, and up 99 mbu, respectively, from a year ago, which would translate into fewer grain exports on net.
In summary, the level of grain transportation demand may be similar to last year (in the aggregate) but differ with respect to domestic and export share.