Market Matters Blog
Mary Kennedy DTN Basis Analyst

Thursday 09/27/12

Barge Freight in Southern Mississippi River Lower

The USDA weekly Grain Transportation Report showed barge freight rates for the Cairo-Memphis segment of the Mississippi river decreased last week, dropping to 565% over tariff after posting its highest price of the year the previous week at 750% over tariff. Using the Benchmark tariff (see below) rate of 3.14 for that river segment and then adding last week's price of 565% over tariff, freight in that area slipped to S17.74 per ton vs. $23.55 per ton the previous week. Using soybeans as an example, freight per bushel went from 70 cents a bushel to 53 cents a bushel. This decrease in freight cost helped the soybean basis remain firm with the DTN National average soybean basis at -.48 per bushels for the third week of September.

The freight decrease was due in part to the demand for barges having moved north as corn and bean harvest also moved north. There were also more traffic problems in the lower Mississippi as barges had begun to slowly move again after Lock 27 reopened, only to be held up again by a barge running aground and one barge sinking in the lower Mississippi River. USDA reported that 124 grain barges had moved down river last week, which was 16% lower than what had moved the prior week. Low water continues to plague the river and movement will still be slow as the Army Corps Of Engineers continues to dredge shallow areas to make room for safe passage for barges.

Explanation of Benchmark Tariff Rates per the USDA AMS:

"The U.S. Inland Waterway System utilizes a percent of tariff system to establish barge freight rates. The tariffs were originally from the Bulk Grain and Grain Products Freight Tariff No. 7, which were issued by the Waterways Freight Bureau (WFB) of the Interstate Commerce Commission (ICC). In 1976, the United States Department of Justice entered into an agreement with the ICC and made Tariff No. 7 no longer applicable. Today, the WFB no longer exists and the ICC has become the Surface Transportation Board of the United States Department of Transportation. However, the barge industry continues to use the tariffs as benchmarks as rate units."

Posted at 1:07PM CDT 09/27/12 by Mary Kennedy
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