Barge Rates Take a Beating as Elevators Rush to Make Room for Midwest Crop
In some cases freight rates, post-Katrina have gone up 200 % to 300 %, making Midwest grain farmers keep their crops in the bins in hopes freight costs will drop.
Michael Danna
Published: Sep 23, 2005
Grain shipments along the Mississippi River are returning to normal following Hurricane Katrina and elevators are hoping to catch up before combines start rolling across the belly of the Midwest grain belt.
"When the Midwest really starts cranking up, we might see some more problems," says David Bollich, grain marketing specialist for the Louisiana Farm Bureau Grain Marketing Association. "This is the time of year when the export market comes back to the U.S. We're getting into harvest and our prices are down compared to South America. Because we were behind the eight ball in terms of barges after Katrina, barge freight is very expensive right now. We anticipate many Midwest grain farmers will try to hold on to their crop and hopefully see barge prices fall as we move into late October."
The hurricane shut down the Port of New Orleans for nearly two weeks, backing up Mississippi grain and barge traffic to terminals as far north as St. Louis.
Barges still remain at a premium. Grain companies are using them to store grain still waiting to be shipped out. That, said Zen-noh Grain president and CEO John Williams, directly impacts his operation.
Katrina brought traffic on the Mississippi to a standstill, creating a backlog of vessels waiting to be loaded and barges waiting to be unloaded, Williams says. "That's compounded the impact of the cost of barge freight to bring grain down from the north."
In some cases freight rates, post-Katrina have gone up 200 % to 300 %, making Midwest grain farmers keep their crops in the bins in hopes freight costs will drop. "As the barge freight goes up the interior cash basis levels go down, so there's a huge incentive for them to hold that grain," Williams says. "There's a huge cash carry in the market now, so they're going to do everything they can to hold it off the market." The Loan Deficiency Payment is another incentive for Midwest producers to hold grain. "That's an excellent marketing strategy today," Williams says.
Most Mid-South producers can take advantage of LDP and sell at a later date. But as barge traffic along the Mississippi returns to normal, grain will have to be moved.
"Things are slowly working themselves out," Williams says.
Adds Bollich: "I think we're going to be facing this kind of problem all through harvest."
As of Sept. 21, the main Mississippi River channels are open to draft vessels up to 47 feet. But from mile market 105 south, traffic can only move during daylight hours. Some grain shipping support services along the river south of New Orleans were still without power. Manpower issues also were a concern for companies whose operations were in the direct path of the storm.
Zen-noh was relatively unaffected by Hurricane Katrina. The elevator moves about 11 million tons of corn, soybeans and milo annually, half of which is shipped to Japan.
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Tagged: Harvest, farm, soybeans, Farm Bureau, combines
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