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 terminals.
"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. Huge amounts."
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 farmers.
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
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 USDA said.
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
"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 2,900 barges.
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
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
Grain elevators that had gone nearly empty a year ago, suddenly are
stuffed with grain, thanks to the famine-to-feast shift in grain
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
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 website.
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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
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 lose it."
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
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)
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