This article has been reprinted from the July 11 USDA Grain Transportation Report.
Grain stocks, especially for soybeans, have been high throughout the year. As of June 1, 2019, corn stocks were up 2 percent from the 3-year average, and soybean stocks were up 76 percent.
Grain leaves storage throughout the year for various uses, which results in demand for transportation services from barge, rail, and truck carriers.
The amount of grain used between December 2018 and March 2019 was lower than last year, but similar amounts were used between March and June 2019.
Given lower levels of barge and rail transportation during that latter quarter, this suggests more grain moved by truck in March, April, and May this year versus 2018.
This article describes grain stock and transportation movements from December through June and offers a look at USDA data related to the upcoming corn and soybean crops.
Grain Stocks, Usage, and Movements: December 2018 through May 2019
USDA’s National Agricultural Statistics Service (NASS) provides data on the inventory of stored grain in storage (i.e. stocks) during four times of 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.
Following record soybean production and the third largest corn crop, the U.S. had record inventories of grain (barley, corn, grain sorghum, oats, soybeans, and wheat) on December 1, 2018.
Farmers and commercial facilities continued to hold record stores into March and June of 2019. NASS reported U.S. grain stocks were 13.3 billion bushels (bbu) as of March 1, 2019 and 8.3 bbu as of June 1, 2019.
June grain stocks were up 6 percent from last year and were 12 percent higher than the 3-year average.
Notably, June 1 soybean stocks were 76 percent higher than the 3-year average, compared to corn (up 2 percent) and wheat (down 1 percent).
Looking at the change in quarterly stocks—or “disappearance”—provides insight into grain usage and transportation demand, as grain is moved and used for food, feed, fuel, exports, and other purposes.
Between December 1, 2018 and June 1, 2019, disappearance was 9.9 bbu, down 4 percent from last year and 1 percent lower than the 3-year average.
Disappearance decreased 7 percent from last year between December 1 and March 1, but was relatively unchanged between March 1 and June 1.
Transportation data suggest that changes in grain shipments by truck may be behind the disappearance observations.
On average, trucks move about 60 percent of the grain in the U.S., with barge and rail accounting for 40 percent.
However, data on truck volumes and flows is relatively limited.
The combined barge and rail grain tonnage was down 1 percent in the second quarter (December, January, and February) compared to last year.
They fell 14 percent in the third quarter (March, April, and May), mainly due to reduced barge shipments.
Given grain disappearance and usage were about even with last year in the third quarter, this suggests grain freight by truck increased.
Based on data limitations, identifying the factors behind the disappearance observations can only be partially determined.
For example, combined exports of corn, soybeans, and wheat— which are largely supplied by barge and rail transportation—were down 8 percent December through May compared to last year, mostly due to reduced exports in the third quarter.
Accordingly, exports do not explain the sizeable disappearance levels during the third quarter.
In addition, trucks supply most grain destined to ethanol facilities, but the amount of corn used to produce fuel over the six-month span was down 5 percent from last year.
Trucks also help supply raw soybeans to crush facilities, which was unchanged in the third quarter compared to last year.
Feed, another major use category for grain, could be driving these trends. Only second quarter numbers are currently available.
According to preliminary estimates from USDA’s Economic Research Service (ERS), corn for feed and residual use fell 20 percent, December to February this year, compared to last year.
Given decreases in exports, corn used to produce ethanol, and crushed soybeans in the third quarter, the increased disappearance could be due to increased truck flows to domestic feed markets.
A more complete picture should emerge with USDA’s July World Agricultural Supply and Demand Estimates report (released July 11) and ERS’ revised disappearance numbers (released July 12).
A Look at the Present: June 2019 through Early July
The June grain stocks report by NASS revealed significant stores of grain remain on farms.
As of June 1, 2019, on-farm grain stocks were 19 percent above last year and 21 percent higher than the 3-year average.
Corn, soybeans, and wheat were up 10, 121, and 19 percent, respectively. Large farm inventories mean a sizeable amount of grain has yet to enter marketing and transportation channels and represent a source of potential future demand for grain transportation.
Partially due to reduced exports, states with relatively high soybean stocks saw the largest increases (from 2018) in their total June 1 grain stocks.
With a 78 percent increase in soybean stocks in 2019, North Dakota experienced a 21 percent increase in its total June grain stocks, compared to the same time last year.
Similarly, states such as South Dakota, Ohio, and Indiana saw significant increases in their total June grain stocks.
High stocks mean transportation demand could materialize in and from these areas.
Despite the high stocks in the beginning of June, which means large supplies are potentially available to move, rail and barge transportation has been lower than expected so far.
Specifically, rail and barge tonnages in June (through June 29) have decreased 7 and 65 percent less from last year, respectively.
Both modes have been affected by flooding in recent months.5 Similarly, exports have generally remained well below average in June (GTR Figure 14).
At the same time, U.S. farmers are harvesting wheat and other small grains, such as barley and oats.
According to the latest NASS Crop Progress report, farmers are 47 percent complete with the winter wheat harvest as of July 9, 14 percentage points behind last year and the 5-year average.
Winter wheat represents the largest class of wheat, at around a 63 percent share of all wheat production in 2018.
In its June Crop Production report, NASS forecasts winter wheat production at 1.3 bbu, up 8 percent from 2018.
A Look Ahead
Farmers will continue to boost grain supplies, as they undertake and finish harvesting wheat and other small grains.
Water levels on the Mississippi continue to recede, resulting in improved navigation conditions.
Railroads have restored lines and improved service.
Origin dwell times (which measure dwell at origin points for loaded shipments) for grain trains have improved for BNSF Railway and Union Pacific Railroad, since early June.
However, in a July 11 bulletin, the National Oceanic and Atmospheric Administration issued hurricane watches for parts of southeastern Louisiana, as Tropical Storm Barry develops.
The annual NASS Acreage report, published June 28, provides a glimpse into possible upcoming spatial changes in the demand for grain transportation starting this fall.
It includes the acreage expected to be planted and harvested in the 2019/20 marketing year.
According to the report, corn and soybean acreage in most major grain-producing states is expected to fall.
For instance, South Dakota’s corn and soybean acreage is expected to fall 17 percent compared to last year.
Also expected to fall are Missouri (down 8 percent), Ohio (down 7 percent), Minnesota (down 6 percent), and North Dakota (down 5 percent).
Kansas, on the other hand, is predicted to see a 5 percent increase from last year in its corn and soybean acreage.
Due to excessive rainfall affecting plantings in many states, NASS is collecting updated acreage information and will publish any revised estimates in its August Crop Production report.