CHICAGO (Reuters) — Bumper
corn and soybean harvests in the U.S. Midwest are stretching the
system for moving crops from fields to markets beyond its limits
this year, driving up export costs and crimping profits for farmers
and grain dealers.
After years of drought, the bountiful harvests may have come as
a relief to America's heartland if it were not for the severe
transportation bottlenecks that have developed.
The rising tide of corn and soybeans is causing severe slowdowns
along an interlocking network of railroads, highways and rivers.
Barges and hopper cars are overbooked in a system already
strained by new demand for delivery of oil by rail, a delay of
repairs to river locks, and backlogs at international shipping
"Every elevator and co-op I've talked to says the same thing:
They don't know how they are going to get all their December
deliveries delivered," said Mike Hall, a grain broker in central
Illinois. "There is just a world of grain to move in December.
The Mississippi River and its tributaries are a highway for
grain barges and the cheapest means to haul crops from the heart
of the Midwest farm belt to Gulf Coast export terminals.
When bottlenecks develop in the Mississippi system and the grain
belt's rail lines, the delays can drive up export prices, making
U.S. grain less competitive. They also create a glut in the
interior, which can chip away at profits for the nation's
Indeed, farmers are expected to see net cash receipts from grain
crops fall by 3 percent in 2013 in a year of overall robust
volume, according to a late November report from the U.S.
Department of Agriculture.
Many farmers protect themselves from price fluctuations after
harvest by locking in prices during the summer with futures
trading and other forms of forward contracting.
The decline will occur in a year of robust profits overall for
farmers, with income forecast to hit $131 billion, up 15 percent
from last year and the most profitable performance in 40 years.
Much of the increase is due to sky high livestock prices, the
Corn is the largest U.S. crop in volume and typically is a major
contributor to farm income. But American farmers have faced
significant challenges with this year's crop.
A late spring planting meant the harvest, which typically lasts
10 to 12 weeks, was condensed into about nine weeks. Farmers
rushed to make up for the delay, bringing in the harvest from
late October to early November — the very surge that is taxing
the transportation system.
"We went from zero to 60 in about two weeks' time, once this
harvest started kicking in," said Martin Hettel of AEP River
Operations, comparing the acceleration of this year's harvest to
a race car. Hettel helps supervise the operation of more than
Operators who were stuck with empty boats in the last two years,
when summer drought produced weak U.S. harvests, were expected
to be booked through at least February, Hettel said.
Some shippers are already racing against encroaching winter
weather and ice buildups on some waterways. Northern stretches
of many Midwest rivers are closed to barge traffic, with more
closures expected in coming weeks. That is expected to
exacerbate the backlog for grain merchandisers already
struggling to find empty space on vessels.
The USDA has pegged this year's corn crop at a record 13.989
billion bushels and the soybean crop at 3.3 billion bushels.
The corn harvest — up 30 percent from last year — is expected to
more than double domestic stockpiles, which had been depleted by
drought in 2012 to a 17-year low. For soybeans, stockpiles were
seen rising 21 percent after what is estimated as the
third-biggest crop on record.
Grain elevators that had gone nearly empty a year ago, suddenly
are stuffed with grain, thanks to the famine-to-feast shift in
TRACING THE SURGE
The slowdowns start on the road. Trucks have been hard to come
by this year, shippers say. The drought of 2012 forced some
drivers who typically move grain to seek work in other
industries, such as hauling rocks out of quarries, and some have
not returned, they say.
On railroads, grain dealers have struggled to find empty train
cars. To make matters worse, railway construction and expansion
have caused trains to travel slower than usual this autumn,
further squeezing capacity.
Stuffed with grain, hopper cars on the BNSF Railway last
month were moving at about 20.5 miles per hour (33 kph),
compared with 23.3 mph during the last quarter of 2012,
according to data on the Association of American Railroads
As a result, trains stretching 100 cars long, which normally can
make three trips a month between the Corn Belt and export
terminals on the Pacific Northwest, are logging only two trips,
grain handlers say.
Development of the huge Bakken shale deposit, which has created
demand for transporting oil by rail across the northern U.S.
Plains, has contributed to the slowdown. Bakken oil traveling
from the Dakotas to refineries in the Midwest and elsewhere is
competing for existing track capacity.
Freight costs to the Pacific Northwest are soaring. Some grain
handlers who had booked freight in advance of the harvest have
been able to re-sell the space at a tidy profit to other grain
shippers caught short by the reduced flow of trains.
But those re-sellers can lose money elsewhere. Huge piles of
grain stored on the ground outside country elevators have
steadily lost value as surpluses cause prices to tumble.
"You might be able to give up a train here and there, and make
$300,000 or something. But at the same time, your grain is
sitting there," said a rail freight broker, who declined to be
identified because he was revealing competitive business
information. "The freight division makes money, and the others
Premiums for rail freight are rolling forward into the winter
"A month ago, December was trading at like $500 a car, and now
it is worth $1,300," said Dan Mostad, grain marketing manager at
Berthold Farmers Elevator in Berthold, North Dakota.
One farmer in Mattoon, Illinois, estimated that his local
elevator had 750,000 bushels of corn piled on the ground in a
mound 60 feet (18 metres) high and 260 feet wide. Such
stockpiles suggest traffic out of the Midwest will remain
congested for a long time, grain handlers said.
RIVER TRAFFIC BUILDS AS TEMPERATURES DROP
Grain shipments on Midwest river systems are slowing to a
trickle, too, with delays extending from Iowa and Minnesota down
to the massive export ports at the Gulf of Mexico.
Near the junction of the Mississippi and Ohio rivers in the
central Midwest, stalled repairs at one of the nation's busiest
lock systems caused three-day delays. The blockage pushed
shipping costs on the Ohio River to a five-year high.
Locks on rivers north of St. Louis are nearly a century old, but
tight federal budgets have meant repairs can be made only on a
piecemeal basis. Older locks typically have only one locking
chamber, meaning unscheduled repairs can at times completely
block the mile-wide Mississippi.
"The river is essentially closed until that is repaired, and you
never know which lock it's going to be," said Andrew Schimpf,
operations manager for the Army Corps of Engineers' Mississippi
The backups come to a head at the country's largest grain port
complex around New Orleans. Delays in loading vessels are
running to 10 days, the worst in at least four years.
The delays are all the more remarkable given that private owners
of port facilities, such as Archer Daniels Midland Co , Cargill
Ltd and Louis Dreyfus Corp , have invested heavily in expanding
capacity in recent years to capture rising demand from Asia.
The early winter river traffic is expected to get worse before
it gets better. As temperatures fall, water levels drop and ice
narrows the navigable channels on the rivers that remain open.
For many upstream grain elevators, that means storing more grain
on the ground through winter, leaving it exposed to rot and
causing losses for the owners of the grain.
(Writing by Mark Weinraub; editing by David Greising, Peter
Henderson, Ross Colvin and Marguerita Choy)