This article is taken from the Aug. 31 USDA Grain Transportation Report.
Barge Spot Rates Rise on the Mississippi River
Water levels on the Mississippi River System (MRS) have been falling since June. With lower-than-normal precipitation in the forecast, levels will likely continue to fall in the coming weeks. Restrictions — which have grown increasingly stringent since June — lower the amount of grain allowed to be loaded on a barge. As a result, barge supply has tightened, because more barges than normal are required to ship the same amount of grain.
The tight supply has resulted in a significant increase in barge spot rates. As of August 29, spot rates at St. Louis had reached $23.34/ ton— up 49% from last week, 42% from last year, and 85% from the 3-year average. The St. Louis 1-month and 3-month rates are also elevated — up 53% and 48% from the 5-year average, respectively. If these conditions persist, the tight barge supply could be especially problematic as the corn and soybean harvests progress.
Industry Expert Reflects on “Wacky” Marketing Year for Rail Grain Carloads
This week marks the end of marketing year 2022/23 for corn and soybeans. Reflecting lower production and increased competition, corn exports are down 34% from the same time last year and soybean exports are down 10%. FreightWaves recently published an interview with Jay O’Neil, of HJ O’Neil Commodity Consulting, discussing how these changes affected U.S. Class I railroads.
O’Neil observed that, this year, the railroads have offered “deep discounts” to exporters shipping grain to western ports. Also, historical grain flows were altered: for example, feed grain moved from the Corn Belt into drought stricken Kansas. Likewise, in the absence of adequate domestic wheat, imported European wheat moved from East and U.S. Gulf Coast ports into domestic milling and feed channels. Weekly Highlights Going forward, the growth in renewable diesel and the possibility of sustainable aviation fuel are likely to stimulate domestic demand for grain. These factors may put pressure on railroads to change their equipment and infrastructure investments to accommodate the trends.