Market Matters Blog
Mary Kennedy DTN Basis Analyst

Friday 12/07/12

Barge Freight Lower as River Levels Recede

The accompanying chart shows the strongest (red line) and weakest (blue line) the national average soybean basis (DTN National Soybean Index subtract the Chicago futures contract) has been over the last five marketing years along with the five-year average basis (purple line). As the chart indicates, the national average soybean basis of 33 cents under the January futures (green line) is unchanged from last week and is still above the five year average of the strongest basis at this time. However, the basis bids for soybeans along the stretch of the river between St. Louis and Illinois were lower as shippers now wait to see if the river will close in mid-December. The Mississippi River has continued to drop as reduced flows from the Missouri River and no rainfall are causing the levels to fall considerably in the St. Louis area. Barge lines have reduced drafts in that area to 8'0" from the previous 8'6" requirement last week as the low water is making it nearly impossible to safely navigate.

(DTN chart)

In the weekly USDA Grain Transportation Report, the barge freight rate for the week ending December 1 was almost 90% lower in the Illinois corridor and went to no bid in the Middle Mississippi River corridor as shippers began to pull back on their cash basis bids over concern that the river could close by mid-December. The levels have dropped in the St. Louis through Cairo corridor after the Army of Corps of Engineers lessened the flow from the Missouri River in late November, a procedure they undertake every year in the fall in order to stop ice damns from forming. However, with the drought already having depleted the water in the Mississippi River throughout the summer, it is feared that lessening the flow, along with no significant rainfall, will cause the water levels in the middle corridor to drop to levels that could cause the river to close thus stopping all barge movement up and down the river. The other danger is the rock formations that are protruding from the shallow river which has made navigation even harder for barges. The Army Corps of Engineers originally had stated they would remove the formations in February, but just recently said they could begin work on them sooner in hopes to aid the barge navigation through that area.

Shippers along the river had pushed loadings in order to get their grain moved before river levels became impossible to navigate. The USDA reported in their weekly GTR that 593 grain barges moved down river last week which was up 20.5% from the previous week. Once again, the majority of the grain moved along the river has been soybeans as corn exports continue to remain lower than last year at this time.

Posted at 10:29AM CST 12/07/12 by Mary Kennedy
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