This article has been reprinted from the Feb. 27 USDA Grain Transportation Report.

Throughout the year, available grain supplies strongly influence transportation demand.

To locate trends in grain transportation demand, we examine supply numbers (from period to period), along with other data, to provide insights into recent, current, and future changes in grain stocks and transportation.

Overall, we find truck movements of grain increased earlier in marketing year (MY) 2019/20 (September through November) than they had in MY 2018/19.

Furthermore, the demand for grain transportation between December 1 and the end of the marketing year could be weak overall.

However, the demand for transportation could increase significantly in MY 2020/21, if projected numbers are realized.

September 1 to December 1, 2019—Increased Truck Movements

Disappearance (the difference between grain supplies across periods) can be used as a proxy for the demand for transportation, because everything that leaves storage must enter the transportation system.

Disappearance coupled with known barge and rail shipments can indicate how much is moved by truck.

According to USDA’s National Agricultural Statistics Service, U.S. grain stocks were a record 5.8 billion bushels (bbu) on September 1, 2019.

From September 1 to December 1, producers harvested only 17.6 bbu of new crop corn, soybeans, and grain sorghum—8 percent less than the year before.

This shortfall contributed to relatively low grain stocks on December 1, which reached 16.9 bbu, down 7 percent from 2018.

At the same time, grain disappearance during this period was 6.5 bbu, 4 percent higher than 2018 and 1 percent lower than the prior 3-year average, also contributing to lower December 1 grain stocks compared to 2018.

Between September 1 and December 1, rail and barge grain movements were down 7 percent and 4 percent respectively, compared to the year before.

These two observations—higher disappearance with lower rail and barge movements—suggest increased truck shipments of grain likely made up the difference.

At the commodity level, corn disappearance was about the same as the prior year, soybean disappearance was up 8 percent, and wheat disappearance was up 35 percent.

With corn exports down 363 million bushels (mbu) and total domestic use (industrial use, feed, etc.) up 355 mbu in the quarter, corn transportation tonnages shifted from export to domestic movements.

On the other hand, soybean exports increased (up 88 mbu or 23 percent), while the number of soybeans crushed (a major domestic use category) fell 7 mbu (1 percent).

Wheat domestic use (largely food) was up 90 mbu, and exports were up 33 mbu.

All told, domestic movements were up considerably in the quarter.

This shift likely spurred the increased truck share, as trucks move about three-quarters of the Nation’s grain tonnage destined to domestic markets.

Post-December 1, 2019—Low Transportation Demand in Rest of MY2019/20

Although data sources revealing grain movement patterns after December 1 are limited, a few sources do exist—for example, data on projected disappearance, as well as recent rail, barge, and export volumes.

In the USDA’s World Agricultural Supply and Demand Estimates (WASDE) report in February, MY 2019/20 ending stocks were projected to be 1.9 bbu of corn (ending in August), 0.4 bbu of soybeans (August), and 0.9 bbu of wheat (May).

These projections imply further disappearance of 9.5 bbu of corn, 2.8 bbu of soybeans, and 0.9 bbu of wheat between December 1, 2019 and the end of the marketing year.

Compared to this same timeframe last year, this projected disappearance is down 2 percent (specifically, 2 and 4 percent less for corn and wheat, respectively, and unchanged for soybeans).

Additionally, 10.1 bbu of corn, soybeans, and wheat remain to be used for domestic purposes, along with 3.2 bbu for export.

Both are down 2 percent compared to last year.

Therefore, with total post-December 1 disappearance down, overall grain transportation demand is likely to be weaker than in MY 2018/19.

Further, given the projected low exports and domestic use, it is likely this weaker demand will extend across all modes (truck, rail, and barge).

These projections include activity that has already taken place between December and February.

From December 1 to mid-February, rail grain carloads were well below last year and the prior 3-year average.

Over the same span, barge grain shipments exceeded last year’s by 8 percent but remained below average.

Both rail and barge tend to supply export grain markets, which have also been low, totaling 985 mbu of corn, soybeans, and wheat since December, 7 percent below the same MY 2018/19 period.

A Sneak Peek at the Upcoming Marketing Year

Looking past the current marketing year and into the next, USDA’s recent Agricultural Outlook Forum 2020 released several outlook reports, such as the Grains and Oilseeds Outlook, which provide the Department’s first estimates for MY 2020/21.

For MY 2020/21, USDA projects corn production at 15.5 bbu, up 13 percent from MY 2019/20, with a 5-percent increase in domestic use and a 375-mbu increase in exports.

Similarly, soybean production, crush, and exports are all forecast to increase, with total disappearance projected to increase by 6 percent from MY 2019/20.

Wheat exports are forecast to be unchanged from the current marketing year, while wheat use is forecast down slightly.

These figures suggest an increase in corn transportation demand, including truck, barge, and rail in 2020/21.

Renewed soybean demand from China will play an important role in the increase in soybean exports and will likely require increased rail shipments out of the Pacific Northwest and increased barge shipments out of the Gulf.

The combination of the WASDE and Agricultural Outlook projections suggest that, although overall transportation demand is likely to remain somewhat low for the rest of MY 2019/20, it will likely rebound in 2020/21.