Market Matters Blog
Katie Micik DTN Markets Editor

Thursday 10/30/14

Daily Price Limits to Shrink Over Weekend

We haven't seen many limit up or limit down moves in the grain markets lately, even after USDA reports. The record corn and soybean harvests are a supply factor that's hard to outweigh. And as prices have fallen, so shall the daily futures price limit.

Last May, CME group put a new policy into place governing the daily price limits on grain and oilseed futures contracts. The new methodology allows the price limits -- how much a futures contract can move up or down during a trading day -- to shrink when market prices fall and rise when prices climb.

The new price limits declined across the board in the second adjustment under the new system, no surprise there. The changes are effective when markets open on Sunday evening for the Monday, Nov. 3, trading day.

Here are the new limits are on per-bushel basis.

Commodity Current Initial Price Limit New Initial Price Limit New Expanded Price Limit
Corn $0.35 $0.25 $0.40
Soybeans $1.00 $0.70 $1.05
CBOT Wheat $0.45 $0.35 $0.55
KC Wheat $0.50 $0.40 $0.60

(Also, please remember that since the Minneapolis Grain Exchange is independently owned, its limits don't follow this scheme. The daily price limit on Minneapolis wheat remains at $0.60 per bushel.)

CME updates the daily price limits on the first trading day on or following May 1 and November 1. To arrive at the daily limit, CME group takes the average price of the July or December futures contract over 45 days, multiplies it by 7% and rounds the answer to the nearest 5 cents.

This new mechanism replaces CME Group's ad-hoc style of adjusting fixed daily price limits. In the past, they made relatively few changes to daily price limits and they caught some flak for it in 2011 when traders argued they were too slow to make the change. Prices had already risen, and traders felt the 30-cent limit restricted the market on its upswing.

On the other side of the coin, there were traders concerned that once the limit grew larger, it'd be tough for CME to reduce it if prices swung lower. As the new adjustment shows, CME's found an answer to their concerns. Now we'll just have to wait and see if anyone remembers the daily price limits and expanded limits next time the market makes a limit move.

(CZ/SK)

Posted at 11:10AM CDT 10/30/14 by Katie Micik
 

Monday 10/27/14

Weekly Rail Updates Disappoint Shippers

OMAHA (DTN) -- The latest reports railroads submitted to the Surface Transportation Board appear to bolster claims by elevators that railroads are giving priority to oil shipments over grains, according to a Minnesota Grain and Feed Association official.

The Canadian Pacific Railway has about 14,000 miles of track in Canada and the U.S. and is headquartered in Calgary, Alberta. While potash, grain and oil shipments have kept tracks busy in Calgary, such as this downtown scene earlier in October, other areas in Canada and the U.S. are still waiting for cars. (DTN photo by Elaine Shein)

"The recent (Oct. 22) STB reports received from the railroads, seems to confirm reports we have received from our elevator members of continued delays in service to the grain sector, while oil appears to be unaffected by the unprecedented congestion on the upper Midwest rail network," Bob Zelenka, executive director of Minnesota Grain and Feed Association, told DTN in an email.

Zelenka had told the STB in September that whether perceived or real, it appeared oil traffic was receiving priority from both the CP and BNSF. "While grain elevators waited weeks and even months to receive service, with the severe winter being blamed by the rail carriers as the main culprit, oil trains seem to have been moving steadily throughout the winter and spring, unabated by weather or other constraints, such as, a shortage of crews and/or locomotives," Zelenka said.

It appears from the recent BNSF status update that his concerns were more real than perceived. The BNSF showed that during the week of Oct. 12, 747 loaded grain cars sat idle for more than five days with just six oil cars showing the same delay.

However, the BNSF noted in their update to the STB that "If a car has been held at a point on the BNSF network for more than 48 hours or even 120 hours, it does not necessarily mean that the car will not be delivered in a timely manner or even within the initial service plan. Many cars are held in terminals and other locations on our network as part of the service design for the movement or for the convenience of a shipper or receiver. Potentially significant numbers of delays that are not linked to BNSF's own service performance will be captured as BNSF delays in the data reported as required by the STB." Here is the link to the entire Oct. 22 BNSF letter and service update to the STB: http://goo.gl/…

The Canadian Pacific also wrote a letter to the STB stating their concern over the new reporting system. They wrote, "We believe that to understand the facts of rail transportation, the STB should endeavor to understand the entire supply chain from the fields to the factory and from the factory to the port. We genuinely urge the board to step back and consult with all the stakeholders before implementing these new reporting requirements. This would result in a more meaningful process in our opinion and hopefully would minimize the burden on the carriers, avoid unintended consequences and result in more helpful and complete information." Here is the link to the entire letter by the CP to the STB: http://goo.gl/…

The CP reported that the weekly total number of loaded and empty grain cars in revenue service that have not moved in "greater than 48 but less than or equal to 120 hours" equaled 234 loaded and 139 empties. In comparison, there were 38 loaded crude oil cars and 106 empties. For the week of Oct. 13-19, there are 2,031 grain cars owed to North Dakota that are 2.82 weeks late; 358 cars owed to Minnesota and 100 cars owed to Montana. Here is the link to the Oct. 22 CP service update to the STB: http://goo.gl/…

RAIL BACKLOGS GROWING

As the large grain harvest continues to progress, rail backlogs seem to get a little bigger each week. While it is normal for backlogs to occur during harvest time, shippers are concerned that if the weather becomes a factor soon or other unforseen events occur to further slow cars, they will be faced with another long winter of waiting for cars.

Tim Luken, manager of Oahe Grain, a 5.7-million-bushel capacity elevator in Onida, S.D., which relies on the CP told DTN, "Oahe Grain will normally turn our facility three times a year, but being limited to 50 cars at best a week, we will be lucky to turn it twice and the bottom line will not look so good."

Luken said, "From the time our fall harvest is complete, there is only 31 weeks until the 1st of July when we start harvest again. We only have 31 weeks for farmers to get grain bins emptied along with grain elevators to empty out to get ready for next year to start all over again. If we only get 50 cars a week, this relates to about 170,000 bushel per week that is only 5.2 million bushels to ship out of here during this time period. I can see the scenario that elevators will still be full going into next year's harvest unless something changes."

Bob Zelenka told DTN, "We continue to be frustrated by both the BNSF and CP seemingly kicking the can down the road, when it comes to their 'often revised' pledge to be caught-up by harvest, which obviously has not occurred. We appreciate the action taken by the STB in requiring greater transparency and added service metrics, such as, average dwell times at origin and monitoring traffic going through the Chicago 'choke point.' Transparency and better communication between railroad and rail user will go a long way in improving the efficiency for both."

To see all of the Class 1 railroad filings to the STB on Oct. 22, open the following link and go to Oct. 22 status updates: http://goo.gl/…

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/CZ)

Posted at 11:21AM CDT 10/27/14 by Mary Kennedy
Comments (1)
Has anyone questioned how much, if any, interest in oil, Warren Buffet has? If I recall correctly, the Northern Pacific R.R.( one part of B.N.S.F.) had huge mineral rights. I am curious if he is shipping his own product to himself. Just a thought.
Posted by Bonnie Dukowitz at 7:56PM CDT 10/27/14
 

Friday 10/17/14

Acreage Arguments

I didn't know I was going to stir the pot.

On Friday morning, I sent out this Tweet: "Farmers: how likely are you to increase your soybean acreage next year? Working on quick article and would love some perspective!"

Really, it was a very quick story. Just a quick review of Informa's 2015 acreage estimates. We're about a quarter through corn harvest and halfway through bean harvest, so it's a little early to be putting much stock in these estimates. (If you're wondering, Informa pegged corn acreage down 3.1 million acres at 87.8 ma and soybean acreage up 4.3 ma at 88.5 ma.)

What I learned from Twitter is that, while it's early, there are plenty of opinions on just how much farmer will -- or won't -- increase soybean acreage. Some have really strong opinions -- they divided pretty evenly into the stick-to-the-rotation camp and all-about-economics camp -- but others are still weighing their options, concerned about seed and fertilizer prices.

Cory Ritter, a farmer in Blue Mound, Ill., argued it'd be tough for some farmers to increase soybean acres next year if they already made large increases in 2014.

Kyle Wendland, who farms in a heavy corn-on-corn area near Fredericksburg, Iowa, thinks there are plenty of reasons, mostly economic, for farmers to increase soybean production. Given the revenue incentives, there's lots of land that could be planted to beans for the first time in a while.

Here's a smattering of the other responses I received (edited to make them easier to read, aka I removed the hastags and filled in missing words):

"Corn acres plummet next year at current price levels, so the default option is soybeans, lots and lots of soybeans. Ontario corn acres will be down another 30% next year, ditto across the US. Corn belt prices don't lie unless (there's) a winter surprise. Seed corn prices need to drop 25%, fertilizer will be much lower. There is a way out, but now, it's plant beans." -- Philip Shaw, @agridome, Ontario, Canada

"Major increase in double crop for us." -- Jason Goetz, @piratepride2, northeast North Carolina

"Unless fertilizer drops 25% or corn price rises to $4.50+, more beans everywhere except I states and Irrigation, the other I state." -- Stephen Ellis, @sellis1994, Virginia.

"Stay the same. May even go to more corn acres depending on if Bayer is approved for SDS treatment." Richard Mellencamp, @rmellenc

"Moving long term corn acres (3+ years) out of that rotation and into beans. Everything will go corn, corn, beans. We've been 2/3 corn to 1/3 beans since before I was born, '07 we went to 75-25. Going back to the 2/3 ratio." Bryan Boock, @BryanBoock, Bald Bluff, Ill.

"May go more corn, better local markets, better upside potential. I'm a little contrarian too." Adam Ramthun, @Adam_Ramthun, Manson, Iowa.

"In North Dakota most producers will increase acres by 25% or more." -- Kurt Weninger, @Weninger75,

So, what do you think? How likely are you to increase soybean acreage next year? What's the key consideration in your thought process?

(AG/CZ)

Posted at 2:21PM CDT 10/17/14 by Katie Micik
Comments (6)
We will plant about same acres of corn, a few less acres of beans,but half as much $5.00 wheat. I will plant oats on bean and wheat acres. Had $400.00 an acre profit on oats this year.Beans bar far will make the most money, but rotation will also make you money.
Posted by Raymond Simpkins at 8:13PM CDT 10/18/14
Any body going to plant hay? I think more will be returned to hay and grazing( where fence and cattle are available). The cattle can spread the fertilizer for a couple of years. When markets improve, a cash crop can then be utilized.
Posted by Bonnie Dukowitz at 7:37AM CDT 10/19/14
Maybe some more bean acres, but not much. Have been in a non gmo bean program the last 5 years and am very thankful I stayed in all this time, the big guys can't get in since they closed the program off to anyone new a couple years ago and now they are crying because they want to know how to afford their big cash rents AND shiny new paint. We are going non gmo corn next year also, even though we aren't in a program, I am not a hippie/health nut, but I am so sick of paying Monsanto and everyone else tech fees that with a little extra work on my part can be money in my own seed bag!
Posted by Farmer Johnson at 2:50PM CDT 10/20/14
Up north where we have a $1.00/bu. plus basis on corn. I believe there will be much less corn. The basis on other crops are very wide as well, however with less bushels to handle the cost/acre is less.
Posted by SCOTT HENDRICKSON at 7:24AM CDT 10/22/14
Almost every year about this time farmers start thinking about which crops to plant the following year. The harvest surge of commodities complicates this process, sometimes causing growers to make premature plans. For now it's probably best to plan on sticking to rotation plans and make modifications later when true demand patterns begin to settle in.
Posted by Ernie Flint at 8:03AM CDT 10/24/14
I think you will get more soybeans mostly for rotational reasons and basis levels. If you get down to the 87-88 million acre range, it doesn't leave the "markets" much wiggle room for an average crop year. You will lose corn acres in the fringe areas as well, like ND, Western plains, Northern MN just because of economics and basis. If that is where we lose the 4 to 5 million acres, that won't hurt as much as if it were in the I states. IMHO, The rest of the corn farmers will gamble/hedge their corn acres on that assumption and hope to see a decent rally to the mid $4 range.
Posted by Pedro Sanchez at 9:11AM CDT 10/24/14
 

Thursday 10/16/14

Crude Crashes to 4 Year Lows

Crude oil prices have plummeted more than 20% since June, hitting four year lows, and for those of us in the Midwest, that means gasoline prices now (or will soon) sport a $2 per gallon price tag. At least the price of one of farmers' input costs is going down.

Surging U.S. oil production and declining global demand has shifted the supply and demand situation, but the role of the Organization of Petroleum Exporting Countries (OPEC) is perhaps more interesting. Several articles, like this one from Bloomberg (http://bloom.bg/…), explain that OPEC wants to pressure U.S. shale producers into curtailing production by driving prices below breakeven levels -- even though major oil exporting countries aren't sure of how low they'll have to push prices.

As a result, every major financial news service ran a version of the "winners vs. losers" article this week. The losers are energy producers, their countries and governments, while the winners are consumers, according to an article in the Financial Times. "The decline in prices would generate a $1.8bn daily windfall, about $660bn annualized," the article stated. "Tracking this into gasoline prices, in the U.S., where last year some $2,900 per household was spent on gasoline, the windfall would amount to a tax rebate of just under $600 per household." (You can find the whole article here: http://on.ft.com/…)

Farms run on diesel fuel and gasoline, and the current market provides farmers a chance to lock-in some of their needs at good prices. DTN senior analyst Darin Newsom said farmers may want to consider contracting with a local provider to cover 2015 needs. Harvest is a busy time for farmers, but Newsom said that "unless some drastic change occurs, which it shouldn't, opportunities will be hard to miss."

But he cautions: "Looking for a buying opportunity in a market where the S&D is so out of balance is similar to hedging into the cattle market. It might make sense on paper, but hedges/contracts have not turned out well."

Michigan farmer Barry Mumby has been following energy prices for several weeks, but feels the future is murky.

"With a general slowdown in the economy and the uncertain situation with all that has happened with Ebola this week including the abrupt unexplained rally in the Dow Jones at about 2 p.m. Wednesday, a solid market projection is iffy at best," he said to DTN in an email. "I have been interested in hedging my fuel needs in the July '15 heating oil contract, which is at a five year low as I write this. There is no carry from now to July, so the big players must view the growing U.S. supply of crude will hold prices at or below the current price.

"My gut tells me it is time to cover up, but market signals really aren't on my side," he said.

Newsom said the fundamentals of the crude market are difficult to read as the market structure appears to be in a transition. The strengthening inverse is usually bullish, but now it's actually a bearish sign. I highly suggest reading his Newsom on the Market column on Friday for a better understanding of the changes underway in the crude oil market and what it means for you and your farming operation.

That said, has anyone taken advantage of this price move? How?

(CZ/SK)

Posted at 2:06PM CDT 10/16/14 by Katie Micik
Comments (6)
Election year. I can not believe all of you at DTN are saying this is a market price for crude oil. Again ELECTION YEAR- no different than the REPORTS by the government on WASDE . No matter how thick the smoke screen- the political FUNDAMENTALS of government is -VOTES. Come on, enough is enough. Insulting farmers about low energy prices on election years- how about the High costs before elections? Somehow that was not important-now this "so called transition" in energy costs is going to make the difference to farming after the meltdown in commodities by the Almighty USDA reports and "ESTIMATES."REALITY IS HOW MOST AMERICANS SURVIVE.
Posted by DAVID/KEVIN GRUENHAGEN at 11:03PM CDT 10/16/14
David/Kevin...........Well said!!
Posted by GWL 61 at 8:22AM CDT 10/17/14
I guess we'll see if fertilizer prices drop now that oil is "cheap". That's usually the reasoning for high fertilizer costs if I'm not mistaken. Normally I try to avoid the scheme and device talk, but after the soybean numbers this growing season how can it not be a hot topic.
Posted by TOM DRAPER at 8:25AM CDT 10/17/14
Crude is down more than 20% in the last, lets just say year or so, corn is down about 40%, but yet anhydrous ammonia and Diesel are the same price now as when I was growing $6-$8/bu corn a couple years ago. I just read the other day that the US is going to pass Saudi Arabia in oil production very soon as the top oil producer in the world. 10-15 years ago I remember paying about $.90/gal of gasoline, about $.80/gal for diesel, and selling corn for not much less than today if any less at all. I havent researched or remember what I had to pay for nitrogen back then, but do the math. Inflate all those numbers equally, you end up with $3.00-3.50/ gas, $3.50-4.00/ gal diesel, anhydrous at $600-700/ton and corn at around $9.00/bushel. Somebody is playing games no doubt!!!
Posted by RJZ Peterson at 9:49AM CDT 10/17/14
You might be right. It appears many Bakken oil producers have the cost of production too low to be a target of the Saudis. The OPEC move could be more economic sanctions placed on Russia. Ukrainian � Russian peace talk are currently on going. There are the highest representatives meeting in Italy yesterday and today. If crude oil price rebounds on a peace treaty announcement, when/if that occurs, we will have a better clue as to the motivations of Saudi Arabia. Most are forecasting a weak Ruble with declining crude oil prices. One may wonder if Russian farmers will follow the Argentina farmer�s lead. The falling Argentine Pesos had Argentina's farmers withholding their crops from the market. Their thought process seemed to be; �Why should I sell something with a relatively stable value to receive a currency � cash - Pesos � that is worth less each day?� Freeport, IL
Posted by Freeport IL at 9:53AM CDT 10/17/14
You all have made good points. But the man from Freeport , I'll. I think has come the closest in why the price of fuel has come down. That would also explaine why fertilizer isn't coming down. They are in a different world of there own. You want cheaper fertilizer then don't buy any OR PREORDER ANY. If 50% of you out there did that. It would bring fertilizer down where it should be. Maybe you guys could do what Argentina farmers are doing. Its worthless gold right now ( grain ). Once finished with harvest, lock the doors on everything and take time off until after New Years. You starve the market the money will come to put the price up there where you can be profitable again. WHAT HAVE YOU TO LOSE. SELL CHEAP GRAIN NOW! OR STARVE THE MARKET FOR TWO MONTHS AND GET SOME ROI ON YOUR CROP!
Posted by Crawford McFETRIDGE at 9:29AM CDT 10/30/14
 

Monday 10/13/14

STB "Ups the Ante" for Railroads

OMAHA (DTN) -- Beginning Oct. 22, all Class I railroads will be required to publicly file weekly data reports regarding service performance "to promote industry-wide transparency, accountability, and improved service," the Surface Transportation Board announced on Oct. 8.

Oil trains seem to be a much more common sight in northern Minnesota than grain-carrying trains. (Photo by Kelly Moshier)

The order follows the board's recent public hearings regarding rail service issues, at which many rail shippers expressed concerns about the lack of publicly available rail service metrics and requested access to certain performance data from the railroads to help them better understand the scope, magnitude, and impact of the current service problems. The data collected pursuant to this order will give the board and interested parties a better real-time understanding of the current rail service issues." Here is the link to the STB announcement: http://goo.gl/…

The announcement was welcomed by those in the industry who have been asking for more transparency and overall communication from the railroads.

North Dakota Farmers Union President Mark Watne issued a statement saying, "This decision is a good first step toward addressing and understanding the severity of our rail service problems in the state. Greater transparency will no doubt lead to a more productive dialogue between shippers, railroads and farmers ... and give all the stakeholders a better understanding of what each other faces. It may also help us pinpoint, and maybe even avoid, future bottlenecks in our rail system with all the real-time data exposed."

The National Grain and Feed Association also commended the STB for requiring railroads to expand weekly public reporting of rail service performance," including for the first time for nonagricultural products and to extend the reporting requirement to all Class I railroads. The new STB order also expands the scope and granularity of service metrics that all Class I railroads now will be required to report, and applies many of the reporting requirements to encompass coal, crude oil, ethanol, automotive, intermodal and manifest traffic."

The NGFA added, "Importantly, the STB's order also requires collaborative reporting of detailed rail service metrics specific to the congestion at the Chicago terminal hub by the six Class I carriers operating at the Chicago gateway -- BNSF, Union Pacific, CSXT, Norfolk Southern, Canadian Pacific and Canadian National."

The Association of American Railroads (AAR) issued a statement from CEO Edward R. Hamberger on Oct. 8 after the release of new STB requirements: "We are examining the STB decision. Since 1999, railroads have on a weekly basis voluntarily provided the STB and the public with railroad performance measures on terminal dwell time, velocity and cars online. It is unclear how the increased reporting requirements in today's order will in any way lead to improved service.

"Railroads are investing and hiring at an accelerated pace to provide the capacity needed to meet growing demand as traffic continues to rebound to pre-recession levels, continued Hamberger. "Hiring and training people, and building infrastructure take time. Railroads will continue to work with their customers to meet the demand to move more freight as America's economy continues to grow."

CALL FOR GREATER TRANSPARENCY

Before STB issued its order on Oct. 8, shippers, industry leaders and state government figures at a recent STB hearing in Fargo, N.D., stressed the need to assess the reality of car backlogs and slow service in the U.S.

Bob Zelenka, executive director of Minnesota Grain and Feed, asked the STB at the Sept. 4 meeting to continue requiring the BNSF and Canadian Pacific Railroad to provide greater transparency through service metrics.

The National Corn Growers echoed that request, "NCGA is worried about the railroads' abilities to provide timely and efficient service during the upcoming fall harvest and heavy shipping period. As a result, we urge the board to continue to carefully monitor BNSF's and CP's grain service through the fall harvest and take additional actions, if needed."

Eric Broten from Dazey, N.D., testifying on behalf of the American Soybean Association, said, "We support the request made by the ASA for the STB to require railroads to submit metrics showing past dues, average days late, turnaround times, etc. for agricultural customers vs. crude oil customers and other customers.

Oil train service was the one thing most people who testified at the 9 1/2-hour hearing on Sept. 4 wanted to know about. What was the level of service for oil trains, and were oil cars ever late like the backlog of grain cars? While the railroads present never answered that question, it's not difficult to figure out the answer if you live or travel in the northern part of North Dakota and Minnesota because nearly 75% of the time, long trains of oil cars are all you see.

On July 26, the Minneapolis Star Tribune newspaper said, "Fifty oil trains, each loaded with more than 1 million gallons of North Dakota crude oil, pass through Minnesota each week, and almost all of them go through the Twin Cities, according to the first detailed reports on the state's crude-by-rail traffic obtained by the Star Tribune.

"The reports, submitted to state officials by railroads and stamped 'confidential,' say that oil trains can be more than 100 tank cars long as they pass through 39 of the state's 87 counties," reported the Star Tribune. "The greatest concentration is on the BNSF Railway main line between Moorhead and the Twin Cities. Canadian Pacific, another railroad serving North Dakota's Bakken region, sends far fewer oil trains through the state, the data show."

That may change in the near future on the CP. At a recent meeting of CP investors, CEO Hunter Harrison's presentation said that, energy products are expected to buoy revenue and the CP may carry as many as 200,000 carloads of crude oil in 2015, which is more than double what the railroad moved in 2013.

BNSF AND CP SERVICE UPDATES

In his weekly podcast, John Miller, Ag VP for BNSF said, "We have completed forming all shuttles for fall harvest and they are in use in the market place. We are flowing soybeans to the PNW to meet vessel demand and turn times have rebounded back over 2.5 TPM in that area."

"With shuttles fully built and operational, general fleet car can be directed toward single and unit car orders," added Miller. "We expect past dues to stabilize as car supplies recover to meet demand." Miller said that current delays are a result of harvest demand and noted that overall volumes so far this harvest exceed volumes seen last year at this time in North and South Dakota. Here is the link to the weekly service update to the STB: http://goo.gl/…

In their update to the STB for the week of Oct. 10, the CP stated, "We continue to experience extended dwell within the grain supply chain. This includes origins in North Dakota for wheat shipments east, rail interchange locations and destination unloading at mills and export terminals. We are working with the shippers, facilities and other railroads involved to improve the situation, both at origin and destination. Overall rail capacity is reduced when cars sit idle. This is because any delay in the supply chain results in fewer trains or cars in the cycle." Here is a link to the complete update by the CP to the STB: http://goo.gl/…

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/CZ)

Posted at 10:47AM CDT 10/13/14 by Mary Kennedy
Comments (9)
Good Grief! Another waste of time. Is that all the STB and the balance of government has to do is mandate more time to non-productive activities. Take a look. Too much traffic, whether rail, air, truck or barge, causes congestion. Congestion causes delays and inefficiency. Get rid of the Enviro, vote mongering Senators and Reps. delaying infrastructure improvement and a step in the right direction will be accomplished. Barge traffic, rail traffic and pipeline traffic improvement are action needed, not more idiots analyzing a problem which they created. How about some public works projects ( hugely successful in building infrastructure in the past) instead of entitlement programs.
Posted by Bonnie Dukowitz at 7:36AM CDT 10/14/14
Those are all good ideas Bonnie , but I'm afraid we are SOL, until the current administration and his cronies are "shipped out".
Posted by GWL 61 at 8:27AM CDT 10/14/14
Bonnie, You sound almost in the tone of FDR in some of your logic. And it worked well back then. But do not forget, it is the "No Accomplishments at All Costs" right side of the Congressional aisle that refuses to do anything constructive here. It's not your perceived "boogey man" administration holding it up. You voted for the guys sitting on the purse and calling for more House vacations. And you will this time. Look in the mirror for whom to blame.
Posted by Don Thompson at 1:19PM CDT 10/14/14
What a concept-------maybe the House, the Senate, and Supreme Court should have to report to the American public what they have accomplished each week ( of course only the weeks they actually work). Only one side of one sheet of paper would have to be use for all three!
Posted by n smith at 4:51PM CDT 10/14/14
Seems strange Don, The right side of the aisle you reference as non-constructive has voted in favor of Keystone and publicly supports other infrastructure projects. Might want to take a look at some votes and executive orders by Obama and actual realities of his cronies in the Senate. Do you by chance live in Colorado? I hear the air is thin and Whompum weed is of plenty.
Posted by Bonnie Dukowitz at 8:00PM CDT 10/14/14
Help may be coming in the longer run in the form of OPEC. John Kilduff, founding partner of Again Capital, basically said tonight, on Nightly Business report; "The Saudis are tired of loosing US market share in crude to the Bakkin formations. The Saudis want to teach the new "kid" who the low cost producers are. At the upcoming OPEC meeting Kilduff is expecting the Saudis to push for ultra low crude prices. The goal is to push the new producers out of business. Kilduff notes Saudi Arabia used this process in the mid 1980's when OPEC countries - Venezuela in particular, refused to drop production to hold/increase price. So Saudi Arabia flooded the World with oil. The price drop. Many non OPEC countries with "high" cost of production were financially forced to shut down. (It looks like crude prices dropped in half during that time frame.) So if Kilduff is correct, OPEC will be moving to push prices lower to shut down North Dakota oil. If that occurs, we will have the trains back looking for grain to move. A side benefit might be the decline in a revenue source for ISIS. ISIS receives revenue from stolen crude oil. They sell it at a discount of the black market. Things need to be "really" discounted to move "hot" products when general prices environment is low. Remember this is just one man's thought. Freeport, IL
Posted by Freeport IL at 1:01AM CDT 10/15/14
Interesting analogy, Freeport. With oil a world wide commodity, you may well have a view of the big picture based upon some history.
Posted by Bonnie Dukowitz at 5:53AM CDT 10/15/14
Bonnie, I agree the house has passed all kinds of bills of late, but with riders on each one that would cancel - well, you know what! How many anti Healthcare for Americans "votes" are they up to now? From what I read, the pipeline extension proposal is opposed by landowners and environmentalists among others. Why do you just attack the environmentalists?
Posted by Don Thompson at 8:31AM CDT 10/15/14
You bring up couple more examples of Don. For our health insurance, Obamacare is a disaster. We made the mistake of making our health insurance premium a priority. Had we paid nothing, our benefits would now be very lucrative in comparison. I wonder how many of those land owners use no oil. They want the oil, but the pipeline on someone else's property. The pipeline and high lines across our property are a nuisance, however as long as the light switch responds, I will tolerate them, somehow.
Posted by Bonnie Dukowitz at 12:25PM CDT 10/15/14
 

Friday 10/03/14

Informa Pegs Bean Production Above 4 Billion Bushels

OMAHA (DTN) -- Private analytical firm Informa Economics sees U.S. soybean production climbing over 4 billion bushels with an average yield of 48.5 bushels per acre.

"This estimate adds to the bearish case for soybeans and soybean prices are trading lower in response to Informa's numbers," DTN Analyst Todd Hultman said.

Informa's production forecast is 104 million bushels higher than USDA's September estimate and its yield estimate is 1.9 bpa higher. No state average yield is expected to decline from September's estimates, Informa said.

Soybean planted acres will likely be reduced by 1.2 million acres in USDA's October report, but yield increases will "more than offset a potential production loss associated with the acreage reduction."

USDA will incorporate the Farm Services Agency's certified acreage data in its October Crop Production and World Agricultural Supply and Demand Estimates that will be released on Friday, October 10, at 11 a.m. CDT.

Informa expects USDA to forecast corn production at 14.395 billion bushels. While that's unchanged from USDA's forecast in September, Informa sees USDA increasing the national average yield to 176.4 bpa, up 4.7 bpa from September, while lowering harvested acreage by 2.3 million acres to 81.6 ma.

"If true, the total production is the same as USDA's September estimate and probably less than the many in the market currently expect," Hultman said.

Illinois's average yield will cross the 200 bpa mark, Informa said, coming in at 206 bpa. That's 12 bpa higher than USDA's September estimate. Iowa corn yield is forecast at 191 bpa, up 6 bpa from USDA's last estimate.

Informa projects grain sorghum production at 412 mb, 19 mb lower than USDA's forecast in September, with an average yield of 68.2 bpa, one bushel larger than last month's estimate. Informa's analysis of FSA acreage shows an expected 371,000 acre decline in planted acres.

Informa also released its updated estimates on world numbers, but Hultman said there were no significant changes for corn or soybean supplies.

"For wheat, Informa expects roughly 4 million metric tons more world production than USDA's estimate for the Former Soviet Union (+1mmt), Europe (+2 mmt) and Argentina (+1mmt)," Hultman said. "On the other hand, they expect roughly 1.5 mmt less production for Australia than USDA estimates.

"Informa's estimates are bearish overall for wheat, and prices are showing little impact from Friday's report."

Katie Micik can be reached at Katie.micik@dtn.com

Follow Katie Micik on Twitter @KatieMDTN

(ES)

Posted at 11:40AM CDT 10/03/14 by Katie Micik
Comments (6)
Has there ever been a report how wrong Informa has been in other years? seen there Inflated numbers before
Posted by andrew mohlman at 9:05PM CDT 10/03/14
Some day people will learn the difference between instant yield and average yield on their yield monitor, big mouths and a few good spots here and there has cost American farmers billions!!
Posted by JAMIE KOUBA at 12:29AM CDT 10/06/14
Hi Andrew. Informa publishes their history vs. USDA in every report. For reference: Over the last 10 years on corn, Informa's October estimates been higher than USDA's October forecasts 8 times, and lower twice. On soybeans, they've been higher 8 times, even twice, and never below.
Posted by KATIE MICIK at 9:20AM CDT 10/06/14
Katie, based on Informa's history, are they more right than USDA or not on the ending yield per acre? It's one thing to just release numbers, and its another to have good data and release the numbers. I think the bean crop is going to be phenomenal. I just combined beans last weekend that averaged 50 bu/A on ground that got 16 inches of rain in one week in June, and then didn't rain hardly anything measurable from late June until late August. Oh they also got nipped by some frost too.
Posted by Pedro Sanchez at 8:44AM CDT 10/08/14
Frost damage worse than expected in North Dakota beans running 20-25 or less early maturing varieties good 35-40 the longer day beans very poor
Posted by Unknown at 11:27PM CDT 10/08/14
It doesn't matter what their report or any other says ALL unpriced soys getting locked tight in the bins until the cash market gets back to $11 at the very least. I don't know anyone that can make it work under that .after all I raised them ,they are mine , and they aren't going anywhere for less . Until then I'm binning them . Maybe Informa should release a report on the minimum price it's gonna take to get them out of the farmers hand . Now wouldn't that be more useful interesting and and informative ? I challenge you for those numbers Informa . And if you could please have that out by Friday morning , after all you seem to know all the other magic numbers ?
Posted by Unknown at 12:00AM CDT 10/09/14
 

Thursday 10/02/14

Senators Request USDA Study on Rail Service Delays

It seems like everyone's got their back-of-the-envelope calculation of what this year's rail service delays have cost farmers and businesses throughout the Northern Plains.

The University of Minnesota put out a study arguing the railway bottlenecks cost the state's farmers almost $100 million between March and May, and it could cost $124 million more in lost revenue.

Now, bipartisan pair of senators is asking USDA to conduct a more thorough economic analysis of the challenges facing agricultural shippers. Sen. John Thune, R.-S.D., and Amy Klobuchar, D.-Minnesota, said in a letter to Secretary Vilsack that regional studies only tell part of the story, and a study that's broader in scope is needed.

"Therefore, we respectfully request that the USDA conduct a more detailed economic analysis of the ongoing transportation challenges facing producers and agricultural end users in our region, including food processors, livestock producers, and ethanol refiners," the senators wrote. "When completing this analysis, we request that the USDA also consider, as appropriate, commodity prices, food prices, and changes in agricultural exports. We hope that the information provided by this analysis will present a clearer picture of the challenges facing the agriculture industry as we work to help resolve them."

It sparked an interesting dialogue in our newsroom this morning.

DTN Analyst Todd Hultman's first impression: "I think what they are saying is: Since our farmers are getting hurt by the lack of rail service, let's take advantage of this to give money to some Midwest university to run a study so it looks like we are doing something when, of course, we are not."

DTN Cash Grains analyst Mary Kennedy: "One of the things that has never been 100% quantified is the loss of money to all businesses affected by the rail backlog. I think it would be good to have in order to 'drive the point home' if any legislation is going to change giving the STB more power. And even then that may not fly, but it's worth a shot in my opinion."

Sen. Thune and the chairman of the Senate Commerce Committee, Sen. Jay Rockefeller, D.-W.V., passed a bill out of their committee last month that would give the Surface Transportation Board, the railroad's governing body, a little more authority while streamlining some of its functions and allowing the board to only respond to complaints, it could initiate investigations.

But DTN's Ag Policy Editor doesn't give the bill much of a chance. "Don't hang your hat on any legislation coming out of Congress on this. The House is incredibly anti-regulatory and that will be the case even more so after the election. The Senate will become more anti-regulatory after the election as well. Moreover, you are dealing with these low prices affecting a wide swath of land that only affects a handful of congressional districts."

So here's my question: what's the end game?

Yes, the Senators want to pass a bill. Numbers might help them rally others to their cause, but like Chris said, it's an uphill battle.

I think farmers would like to be able to point to a study showing that they weren't crying wolf and making up wild tales of their misfortunes. The problem is a very real one for farmers, and I think most people within the agriculture industry know that farmers pay the cost of the transportation through lower cash prices.

But when I talk to friends who know nothing about agriculture, they still know about the oil boom in the Bakken. Fiery train explosions make headlines, and they can't help but look at a picture or two. It might take a very large number in a headline (thinking billions) to draw their attention to the economic damage farmers, grain shippers and exporters faced this past year. And even then, their attention will be fleeting.

The biggest outcome of a national study may be that it helps farmers and elevators put their losses into perspective. I'm sure everyone knows their neighbors are feeling the same pinch, but understanding how their losses fit into the bigger picture may reinforce the fact that they are far from alone.

(AG/CZ)

Posted at 11:44AM CDT 10/02/14 by Katie Micik
Comments (1)
Typical political B. S. Get Harry Reid to allow a vote on the pipeline and the main issue would be solved. Sen. Klobuchar and Sen. Franken, from Minnesota, are holding hands with Obama in opposition. Take advantage is correct. Both of these Senators are raising millions of $ for campaign financing from New York to California, at the expense of all upper Midwest industry. Get another study and then sell what they accomplished to the voters. Absolutely Nothing but waste more money. Obama, Franken,Klobuchar, your buddy Buffet, owner the BNSF, has enough cash.
Posted by Bonnie Dukowitz at 5:34AM CDT 10/03/14
 

Tuesday 09/30/14

Industrial Reports to Make a Comeback in 2015

Agriculture industrial reports on wet and dry ethanol milling, flour milling, oilseed crush and cotton suffered from the Census Bureau's budgetary axe in 2011, but USDA announced on Monday it's ready to put the reports on 2015 calendar.

"As soon as the Census Bureau announced they were discontinuing the Current Industrial Reports, we began hearing from agriculture stakeholders around the country about the impact this decision had on the industry," said NASS Administrator Joseph T. Reilly. "These reports are such an important element of sound economic policy planning and are used for market analysis, forecasting, and decision making that we knew we had to provide the data and I'm glad that beginning this year NASS is able to do just that."

USDA officials announced they'd be taking over the Current Agricultural Industrial Reports last year, and they've been spending a lot of time since then building contracts with the industries involved and establishing a baseline.

The ethanol production and flour milling baselines are a little farther along than their oilseed crush baselines, a NASS spokesperson told DTN.

The agency will work with 200 ethanol production facilities representing capacity of 14.792 billion gallons of annual production. NASS plans to survey 183 flour milling facilities with a reported 24-hour milling capacity of 1,594,755 hundredweight, USDA stated in a press release.

It's tougher to gather a baseline for the oilseed data because the industrial reports cover a much broader industry, like salad dressing manufacturers, and USDA has to build a whole new set of contacts, the NASS spokesperson said. The Census's soybean crush data was perhaps the most-missed report. Its absence left the less thorough survey of National Oilseed Processors Association members as the key market indicator.

The NASS spokesman said the hope is to start releasing all of the industrial reports in 2015, but he couldn't specify when each report will be released. USDA did publish a new website on the surveys with more details. You can find it here: http://www.nass.usda.gov/…

(CZ/SK)

Posted at 8:10AM CDT 09/30/14 by Katie Micik
 

Monday 09/29/14

Elevators Full; Grains Get Grounded

OMAHA (DTN) -- As the row-crop harvest in the Northern Plains moves ever closer, worries are mounting among producers and grain elevator operators about continued transportation delays and whether there will be enough room to store what are expected to be large corn and soybean crops.

A ground pile of corn may become a new fixture in the Midwest if rail backlogs continue. (DTN photo by Nick Scalise)

Tim Luken, elevator manager at Oahe Grain, Onida, S.D., told DTN in an email that one of his producers asked, "How am I going to get cash to pay bills if no one will take any grain because they're full?"

Luken said that as it stands now, he will have no room to bin soybeans this fall. He said he will have room for corn and some sunflowers, but space will be tight. "This will put more burden on those elevators that are going to be taking beans this year, and their space is limited also. We will see piles like never before. FYI: We don't pile anything on the ground at Oahe grain. It doesn't pay at all. 2014 harvest will be one for the record books along with one to forget about; can't wait until it's over." Oahe Grain has storage capacity of 5.7 million bushels and is located on the RCPE line which is serviced by the Canadian Pacific.

Luken said the rail cars he does get are still past-due orders from midsummer and shuttles have priority over smaller units, which puts him in a bind to load out grain owed to others in smaller quantities. "I have buyers screaming for product; mainly ethanol plants. The corn I owe was sold for delivery in August, and here it is almost the end of September. They are running out of corn and need mine now because the harvest hasn't started there."

On a different short line served by the CP, the DMVW in western North Dakota, an elevator is still waiting for 23 small units (25 cars each unit) ordered for placement earlier this summer. CP shippers have said the railroad is still pushing elevators to cancel past-due orders, but many refuse to do so. In their Sept. 22 service update to the STB, the CP said they would have older grain car orders cleared by Oct. 1, "with the possible exception of some remaining North Dakota grain orders." Many CP shippers in North Dakota have said in the past that appearances of the CP clearing backlogs is "deceiving" when they have actually cancelled many of those open orders.

In their Sept. 26 filing to the STB, the CP said, "The number of open grain car requests is 3,943. Of these requests, 3,243 will be serviced through our existing car request program. The remaining 700 of these requests represent cars that will move in train service. The number of open requests will continue to come down over the coming weeks." Here is the link to the CP filing to the STB: http://goo.gl/…

BNSF REPORTS CAR PLACEMENTS SLIGHTLY BEHIND FROM PRIOR WEEK

According to the BNSF website on Sept. 26, the railroad said their maintenance program remains ongoing, particularly across the North Region prior to winter's arrival. "The major maintenance work taking place along our main line between Chicago and Minneapolis-St. Paul continues as planned, resulting in limitations on capacity and re-routing of some traffic onto alternate routes." The service update also reported the BNSF is "aggressively ramping up our capabilities in anticipation of harvest-related volume."

In his weekly podcast, John Miller, group vice president for agriculture, said "our goal is to have all needed resources in place to handle the soybean harvest in the north as efficiently as we can for our customers." Here is a link to his full podcast: http://goo.gl/…

Miller also reported on the status of past-due cars and said as of Sept. 25, the total number of cars owed was 2,921 versus 2,581 the week prior and days late on average were 8.6. Cars owed in North Dakota increased to 2,072 versus 1,646 the prior week and the average days late were at 9.2.

A shipper in western North Dakota said his car orders, small units and singles, are 45 days late and on top of that, secondary freight costs were "ridiculous." The last reported cost for secondary freight on the BNSF was at $5,000 to $6,000 per car, an added cost over and above the tariff rate and fuel surcharge. Some of that extra cost is passed on to the farmer in the form of cheaper basis, but there are many elevators who just don't have the cash flow needed to pay that kind of money for guaranteed freight.

As the corn and soybean harvest continues to pick up steam, shippers on all rail lines are concerned that the demand for cars will increase even more than last year's harvest and that railroads may have a hard time keeping up with that demand, even though they have made progress on past-due orders. There is growing concern that much of the corn harvest could end up on the ground if elevators fill up and the possibility of that happening is becoming more real as the large corn harvest is hand in hand with a near-record soybean harvest.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/CZ)

Posted at 11:23AM CDT 09/29/14 by Mary Kennedy
 

Friday 09/26/14

Barge Freight Surges Higher

Record corn and soybean crops are expected to be harvested this fall and with both corn and soybeans moving down river to the Gulf, barges are in high demand.

(Chart courtesy USDA)

Two weeks ago, barge freight rates were already creeping higher with bids from 625% above tariff to 700% above tariff through the river segments. On September 24, rates were at 875% to 1,100% above tariff for September and October. The Illinois River segment at 1,000% above tariff ($4.64) is equal to $46.40 per short ton which equals $1.30 per bushel (56 pounds corn or soybeans). In the Cairo to Memphis corridor, where the tariff ($3.14) is cheaper, 1,100% above tariff is equal to $34.54 per short ton which equals 97 cents per bushel.

Barges are still a cheaper mode of transportation compared to trucks or rail cars, but any increase in freight will affect profit margins for shippers and, in the end, those higher costs will be passed on to the producer in the form of a cheaper basis. Processor soybean basis has been under harvest pressure for the past week with basis levels tumbling off the recent high spot values and moving closer to the cheaper, new-crop values.

While river terminals have adjusted basis levels down in anticipation of harvest as well, the river basis the past 2 weeks has also been a victim of the sharp increases in barge freight. Soybean basis at two Illinois River terminals went from +35 over the November soybean futures and +170SX two weeks ago to -30 under the November soybean futures and -15SX on September 25. Two weeks ago on the Ohio River, 2 terminals were posting +300SX and +250SX and on September 25 they were posting -37SX and +5SX.

Current year-to-date grain barge tonnages are 30% higher than the 3-year average and the highest since 2010, according to USDA's Grain Transportation report. "As of September 13, year-to-date movements of 24 million tons match last year's annual total," said USDA. "Grain movements are up for the year despite above-average ice accumulations in the early part of the year and flooding during the summer that disrupted navigation."

Frequent, heavy rains have increased Mississippi River levels at St. Louis, Missouri, and have aided in nearly trouble free barge movements. As of September 25, the river in St. Louis was at 15.3 feet above zero gauge, well above the average level and above the drought conditions during 2012. USDA noted that with continued adequate river levels and record crops, barge operators expect strong demand for their services during this year's harvest. Barge service in the Minneapolis-St. Paul area usually closes by Thanksgiving due to the beginning of ice accumulations. However, USDA said "barge availability and high rates may be a concern in this area, especially if there is a delayed harvest and earlier-than-normal freezing temperatures."

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(CZ)

Posted at 10:34AM CDT 09/26/14 by Mary Kennedy
 

Friday 09/19/14

A Demand Optimist

Analyst David Hightower thinks the next two months will be ugly for the corn and soybean markets, but he's a little more optimistic about six-month timeframe. He also stressed that the low in the corn market will come before the low in the bean market. He thinks demand will be stronger than people think.

"Make no mistake about it. Soybeans may have an additional dollar on the downside. Corn may have 30 or 40 cents on the downside." That's what the fundamentals would dictate, he said, adding that "in this day in age, we can get a pile up. We can have a combination of internal and external information and developments that can weigh on prices or exaggerate prices on the upside.

"Supply is starting to feel the pinch already, but the market doesn't care about that yet," he told attendees at the U.S. Soy Global Trade Exchange conference. The market's current focus is on how much oversupply of corn the U.S. will have after harvest.

"We are very close to the period of high supply in the corn market, and that's why I'm projecting that in the next two to three months we may find the end of the downdraft in corn prices," Hightower said. "We've already seen that Argentina, Venezuela and maybe Brazil are going to be reducing their corn acres by 10%. We also know that the Ukraine is the third largest exporter of corn. As we come around next year to the planting of that crop, credit will be extremely difficult to come by."

He said he thinks corn prices have another 30 to 40 cents of downside risk. He expects a couple of things to happen around the time prices reach that bottom point. He thinks speculative investors will reach and exceed a net short position of 70,000 contracts, China will record large single-increment purchases and that ethanol exports will take off dramatically in the December to February timeframe.

It will take a while longer to see the low in soybeans, he said. Crop conditions didn't deteriorate in August like they normally do, and "what I fear that more than anything is a surprise report that really puts up ending stocks."

While beans could see their period of highest domestic supply in the next three to five weeks, the low isn't going to come in before more is known about actual South American production. USDA recently revised its new-crop bean planting upwards for Brazil and Argentina, and some private estimates have even come in higher. He thinks the soybean market low, which he puts at $8.50 to $9 per bushel, won't be seen until early 2015, and that's only if there are no major hiccups with South American planting.

"There is some long term value at the $9 level," he said. With bean prices in that realm, oil prices would drop to the 25 to 30 cent per pound range, a profitable level for biodiesel production. Several conference attendees pointed out that biodiesel demand will help absorb large supplies of cheap soybean oil, but won't do much to increase demand. Instead, it's more likely to help hold up the floor.

Hightower argued that another substitution may take place. Soybean meal could displace fish meal in aquaculture rations. Global demand for beef, pork and poultry continues to climb, a large factor in soybean demand's continuous growth over the last decade.

"Tte energy function is as strong as ever," he said. "I just don't understand why 2015 will be any different than the last ten years. It's still going to be the same thing: You've got to have a lot of production, and you've got to be able to get it from where you have it to where the world need it, or it's going to cause a commodity crunch."

(CZ/SK)

Posted at 2:00PM CDT 09/19/14 by Katie Micik
Comments (5)
Has David Hightower ever set foot on a farm? Has he ever worked on a farm or does this USDA puppet know what it takes to make a farm survive? Why do we as farmers always have to take the doom and gloom "Analyst" from another self proclaimed specialist. Bottom line is we as farmers sit back and take another round of lies and do nothing about this never ending USDA plot to drive prices to levels so low not only for their pathetic jobs-remember when the government shut down-people were saying the markets did just fine without government lies- now they more than ever they are on a campaign to justify their pathetic role on American agriculture. I totally understand the law of supply and demand the foundation of a market, now more than ever we need concrete numbers NOT estimates. Now if 'estimates' drive our markets than why can not ALL of us estimate our taxes, why not estimate our speed on the road, better yet let the American tax payers have a stake on what government employees deserve on our "estimates". God blessing us with a bountiful harvest does not include lies from a government agency. FACTS not estimates need to be available to operate a market.
Posted by DAVID/KEVIN GRUENHAGEN at 2:26AM CDT 09/20/14
ww.cmegroup.com/education/browse-materials/bios/commentary/hightower-report.html
Posted by Don Thompson at 10:03AM CDT 09/22/14
Both Kevin & David know what they are talking about, but right now it might as well go down more, as no one is going to sell anyway Brad Paumen
Posted by Unknown at 7:11PM CDT 09/22/14
The auction pages will be full of ads. this winter.
Posted by Raymond Simpkins at 11:23AM CDT 09/23/14
It's interesting that in the 10 paragraphs or so of Hightower's commentary, there is not a single piece of decision making information offered. If he is correct, he will be quick to tout the fact that "he was right". If he is wrong, he will cite some new fundamental information that has had bearing on the markets that no one could foresee. The newsletter writing industry is multimillion dollar a year industry. The fact is that if these analysts were any good at predicting tops and bottoms in the market they would be trading the markets for themselves and not giving market advice to people whose livelihoods depend on them. Hightower's comments make for good conversation, but I would hate to think that I had paid for a subscription to his fluff.
Posted by Unknown at 12:01PM CDT 09/24/14
 

Monday 09/15/14

Elevator Manager: Fall Harvest Could Be "Complete Disaster" Without Rail Cars

OMAHA (DTN) -- Uncertainty surrounding rail car deliveries to grain elevators in the upper Midwest could turn the fall harvest into a "disaster," according to one South Dakota elevator manager.

Empty railroad tracks not an uncommon sight for many grain elevators in the upper Midwest. (DTN photo by Mary Kennedy)

In a letter written by Tim Luken, manager of Oahe Grain in Onida, S.D., and presented at the Surface Transportation Board's recent rail hearing, Luken stated, "I have sold very little small grain into the market due to not knowing when I will be receiving cars to ship out in a timely manner. The farmers are full, the grain elevators are full and this fall harvest will be a complete disaster."

Luken sent a copy of the letter to DTN. In it, he talked about how late the Canadian Pacific is and has been, and the frustrations and money lost by both producers and elevators. "Rail issues started last year in September/October with the Canadian Pacific, about the time oil trains were being shipped from North Dakota off the Bakken oil fields. Cars we ordered were not fulfilled, and it caused elevators from shipping grain that needed to be delivered on contract. I am still shipping contracted spring wheat, winter wheat and corn that was contracted months ago. As of Sept. 5, I am 257 cars behind, and the contract date I am working on is the second week in June."

Luken added, "This year South Dakota will probably see the biggest grain production the state has ever seen. I have traveled all around the state and have not seen one grain deficit area anywhere. Even west of the Missouri River, crops look outstanding. This part of the state is not known for high production. This year will be an exception. With this being said, we should see near-record grain volumes handled no matter where you are in the state. Instead, it will probably be the lowest amount of grain handle that elevators will have due to the rail problems we have today."

Oahe Grain, located on the CP served RRCPE railroad in Onida, S.D., handles 9 million to 15 million bushels of grain each year. Luken said in his letter, "I can see this year of being a disaster with less bushels handled due to the low volume of rail cars delivered to our facility. This will also affect our bottom line of profitability; all due to poor rail service."

CANADA STILL LOOKING FOR PAST-DUE CP CARS

Doug Tallon, chairman of the board of directors of Great Western Railway, told DTN in an email that he is starting to get CP cars that he ordered in March and April. Tallon farms in southwest Saskatchewan and is on the board of directors of Great Western Rail, a short-line rail that is serviced by CP and interchanges with CP in Assiniboia, Saskatchewan.

"I found it quite interesting that the CP delegate at the STB hearing in Fargo tried to justify their record, saying they are moving more than the long-term averages," said Tallon. "This is the same argument they have been using with us. We are starting to receive cars as I suspect with harvest taking place, that the grain companies are emptied out and the grain isn't coming in fast enough to order more cars. The grain terminals are caught up."

Tallon said that they have approximately 1,400 outstanding orders from the old crop with another 700 new-crop orders and the CP is not keen on acknowledging the old orders as shippers in the U.S. have also reported. "Even though we are only a month and a half into the new-crop year, our biggest shipper on the line is telling customers that due to the poor rail service they may already be at capacity for the 2014-15 year," said Tallon. "The customers we have nurtured to come to our short line for product are becoming more frustrated by the day. The lack of rail service has had a very detrimental effect on our business relationships as well as our bottom line."

Tallon said that shipments to the U.S. have been the hardest to meet and the inability to ship grain in a timely manner is having a negative affect on the cash flow situation for the area farmers.

BNSF CATCHING UP ON PAST DUE CARS

John Miller, BNSF's vice president in charge of agricultural shipments, said in his weekly podcast that heavy rains last week in Missouri, Kansas and Nebraska caused delays to traffic due to soft tracks. In his weekly podcast on Sept. 11, Miller said that while most of the tracks have reopened, there is still a washout at Craig, Mo., that BNSF crews are working on repairing.

Miller said that in the past four weeks, the BNSF had "met or exceeded" the BNSF expected shuttle turns of 2.5 per month. He reported that overall, shuttle TPM was at 2.9 to the PNW and 2.9 TPM to the Gulf.

Miller said that, "Clearly one of our goals as we move through harvest is more predictability and consistent turns on freight. The Pacific Northwest is the largest draw on our system for AG volume during fall. This season, the route to PNW will have added and expanded sidings and a new double track.

Miller also reported that system wide, there are 1,879 past-due orders with North Dakota owed 864 and Montana owed 470. To see the complete service update to the STB, here is the link: http://goo.gl/…

As of Sept. 14, the CP had not filed a service update for last week.

STB Considers Additional Steps to Facilitate Recovery of Rail System.

STB Chairman Dan Elliott filed a letter to the STB on Sept. 10, outlining the ongoing rail issues facing all entities that rely on railroads for their livelihood. In the letter, he said, "Although it has long been board policy to favor private sector resolutions when possible, further regulatory action may be warranted for expediting the overall recovery or alleviating particularly intractable service failures. I also believe that any such action should not benefit one industry at the expense of others, or spur unintended negative consequences. While I cannot speak for my fellow board Members, I anticipate further action in light of the recent Sept. 4 hearing."

"At that hearing, both BNSF and CP acknowledged that their respective recoveries had not proceeded as well as they hoped, but expressed cautious optimism that service improvements would occur in the fall, in particular for agricultural shippers. Overall, the hearing helped to crystallize the board's understanding of the current challenges." Here is a link to Elliot's filing to the STB: http://goo.gl/…

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(BAS/AG)

Posted at 11:59AM CDT 09/15/14 by Mary Kennedy
Comments (12)
Put some ground back to grass, raise some beef. Build pipeline for oil fields, this might help too. Having all the eggs in one basket is never a good thing. Right now railroad is the basket.
Posted by GWL 61 at 7:36AM CDT 09/16/14
If the current administration had approved the Keystone when it first was proposed we would not be in this situation. Overzealous environmentalists, and Warren Buffett; owner of Burlington Northern Santa Fe Railroad are using unscientific emotionalism and pure greed to exacerbate the problem.
Posted by Kent L Hoffman at 10:54AM CDT 09/17/14
Let Canada cross their own country if the pipeline is so safe! Its all to export oil, guessing you guys want to pay more for fuel? Anyhow let the markets dictate who uses the rails,,,, isn't that the conservative way? Maybe this country should build some railroads that are better then most 3rd world countries?
Posted by Jay Mcginnis at 12:28PM CDT 09/17/14
There was an opportunity to upgrade a line through SD, in the late nineties, only to be shot down by huge costs and environmental nuts. If we don't spend money on some sort of improvements to infrastructure, we will be a 3rd world country. On another note, if the current RFS mandate is increased, how the hell are the ethanol plants going to move more product with increased production. You belong in a 3rd world country with your ideologies.
Posted by GWL 61 at 1:04PM CDT 09/17/14
GWL -- I'm at a conference on global trade, and this morning's speaker, an econmist from an engineering firm, made a very strong case for why the U.S. lack of attention/desire to invest in infrastructure could lead us to be an "underdeveloped" nation (he didn't call it 3rd world, but close). His main point: Freight movement infrastructure is the difference between prosperity and stagnation. And he went through all the macroeconomic reasons why the American system is likely to stagnate. Another hot topic at this conference is the rail system. Farmers tell me BNSF's talking point -- that the backlog is only 3,000 cars -- is incredibly frustrating. If we still have old crop to ship and the elevators are already full of old crop, there isn't room in farmers' bins to hold the upcoming harvest. In the words of South Dakota farmer -- it's gonna get ugly.
Posted by KATIE MICIK at 1:23PM CDT 09/17/14
This country is too busy spending money on Mideast wars to take care of itself. The cost of these wars would have given us a much needed rail system both for freight and passenger service,,, instead we got ourselves ISIS and an endless war. Thank you president Bush and VP Chaney! Take care of our own problems is the ideology we need, payback from Iraq has been a big zero.
Posted by Jay Mcginnis at 3:41PM CDT 09/17/14
As always Jay, you ramble on into another subject. Man has been fighting on this planet since time. Those crazies over there want to kill you and I. We can sit back and do nothing. Watch the genocide and throat slashing from the comforts of your home, Jay. Never forget 9 / 11 , Pearl Harbor or the Nazi's. Someone wants what you got!
Posted by GWL 61 at 4:06PM CDT 09/17/14
With the backwards attitudes and opinions of some, the so-called developed world would still be lighting their yards with whale oil. That is, what is left of them.
Posted by Bonnie Dukowitz at 8:04PM CDT 09/17/14
Good old Jay Cliché, at it again! (I think she (Jay) is probably an avid Fox News watcher).
Posted by Brandon Butler at 1:31PM CDT 09/18/14
You are so right Bonnie,,, and since I have built a renewable energy infrastructure for myself the gasoline you use in your car, coal to electrify your home/farm and oil to heat your home look just like whale oil. Its time this country gets off Jurassic era energy sources and join the 21st century. We need to build a rail system instead of the massive amount spent on military to defend our oil interests in the Mideast. Take care of ourselves and lead by example. And for GWL, I know a number of Muslims, Egyptians, Iranians and none of them want to kill us, they are nice well educated people, your statement is a broad sweeping stereotype that is racist. If we didn't need oil the mideast issue would be mute.
Posted by Jay Mcginnis at 7:06AM CDT 09/19/14
Amazing Jay says things about stereotyping but that is exactly what he does with conservatives. And I invite Jay to hop in his electric car and come out there to Montana in January. I know he won't because with the standard weather, which changes 4 times a year here as I don't deny climate change, he will only get about 40 miles before he needs to recharge. Maybe Jay can enlighten us why we have to subsidize farmers when they want to buy a grain dryer. If it's his farm and his grain, shouldn't the farmer pay all the costs for processing it? After all, he gets all the income from that and can afford to pay his own bills. And did anyone notice that the railroads are putting $26 billion into infrastructure and enhancements to their workforce? And Jay, stop acting like you are living in a perfect world using no fossil fuel in any farm. Pretty sure we all know what your tractors and grain trucks run on, and the grain dryer you got the grant on to buy.
Posted by CRAIG MOORE at 8:20AM CDT 09/19/14
Folk have been calling for a disaster if the rail car do not show up. I wonder if the disaster is already here. If the rail car magically showed up today, who would be the sellers to clear out the bins? Unless positions were hedged, a forced sale at this time with current cash prices does not appear to avoid disaster. The best one can hope for is better basis. I guess that would be a start. Freeport, IL
Posted by Freeport IL at 4:04PM CDT 09/27/14
 

Thursday 09/04/14

A Full Notebook

Sometimes when I get on a roll with a project (or two), I lose focus on my regular tasks, like keeping the blog fresh. I'm lucky some of my colleagues have stepped up to help fill this space over the past few weeks.

My whole focus lately has been on putting together a feature for The Progressive Farmer's mid-November special issue on marketing and writing the article on DTN/The Progressive Farmer's Agriculture Confidence Index, which will be published on Monday morning. My notebook is beyond full, and here are a just a few snippets of what I've been asking farmers about lately.

One Iowa farmer I spoke with said he anticipates expanding his soybean acres from 30% of his land this year to 60% of his land next year. Beans require fewer inputs, and he figures he'll only lose $15 per acre on beans compared to $75 per acre on corn.

This is one of the major trends I've picked up in my interviews over the past couple of weeks. Farmers are seriously thinking about how to cut back on their costs without sacrificing yields. Most, all actually, said they'll postpone new equipment purchases. Some have mentioned switching more acres to beans. One Missouri farmer, who had cattle and hogs in his younger days but was forced to sell out, said he'd switch some row crop land back to hay production.

Shortly after that conversation, this moved across the Dow Jones Newswires: "The much-improved financial picture for U.S. livestock producers could prompt some farmers to switch to using land for raising animals rather than growing crops, says Purdue economist Chris Hurt. Grain prices have fallen sharply from their 2012 highs and livestock supplies have tightened, helping growers of pigs, cattle and chickens boost profit margins. "If the years from 2007 to 2013 could be described as the 'Grain Era' in which crop-sector incomes had an extraordinary run, the coming period may be described as the 'Animal Era' when producers of animal products have strong returns," Hurt writes. Moving from cash crops to livestock "will be most predominant" in the central and western Great Plains, where land for crop use is "marginal," he predicts.

Farmers in Oklahoma and other parts of the southwest have told DTN reporters they'll be paying much more attention to the livestock portions of their business. And the Missouri farmer who left the livestock industry, isn't alone. DTN Livestock Analyst John Harrington said it's hard for people forced out of the business, and often into retirement, to return. But a growing industry needs more suppliers. During the grain market's boom years, producers turned a lot of grass and pasture ground into fields of corn. Some of that marginal crop ground may be shifted back into pasture during the 'Animal Era.'

Stay tuned. There's plenty more in my notebook to share.

(AG/CZ)

Posted at 4:17PM CDT 09/04/14 by Katie Micik
 

Wednesday 08/27/14

Is Tuesday's Minneapolis Cash Trade a Sign of Things to Come?

All indications point to a large global wheat crop this year. The most recent USDA report forecast global production at a record 716.09 million metric tonnes, up almost 11 mmt or 1.5% from last year's crop. Sounds bearish? Perhaps not so.

This line chart indicates the trend in Minneapolis milling quality spring wheat basis levels, as determined by the midpoint of the reported daily range of basis levels traded, for 12% to 15% protein levels. Cash basis narrowed suddenly on Tuesday, indicating a heightened concern over the prospects for this year's crop quality. (DTN graphic by Nick Scalise)

Crop quality around the world has the potential to become a larger and larger issue. For example:

-- Recent reports have France importing wheat to bring up their quality in order to meet export commitments, with a large percentage of French production failing to meet milling quality. Algeria, one of their top customers, has since stated that they will refuse to accept production sourced from multiple originations.

-- While Ukraine's total harvest is suggested to fall 13% due to the conflict with Russia and fighting in the country, from 63 mmt to 55 mmt, 35% of the crop is estimated to reach feed quality, up from 25% to 30% last year.

Weather remains the key for the North American harvest. As of the most recent weekly USDA Crop Progress report, 27% of the spring wheat crop had been harvested, down from the five-year average of 49%. The State of Washington is well ahead of average, Idaho and Montana are on track with the five-year average, while Minnesota and the Dakotas are well behind average as of August 24. Minnesota had taken off 22% of the crop versus the average of 66%. South Dakota had harvested 57% as compared to the average of 87% and North Dakota had harvested 10% as compared to the 43% five-year average. In addition to the delays, the overall Good to excellent crop rating was reduced by two percentage points to 66% from the previous week. The Prairie harvest remains in early stages.

Tuesday's cash trade in Minneapolis showed just how jittery this market is, with early reports of low protein seen in harvested new crop. As seen on the right of the attached chart, Tuesday's trade in milling quality spring wheat on the Minneapolis Grain Exchange for delivery of 12% to 15% protein Chicago/beyond saw basis levels reported raging from unchanged (12% protein) to $1.75/bu higher(15% protein).

The high end of the reported trading range for 12% protein was up 5 cents to 95 cents over the September. The high end of the reported trading range for 13% protein was up 65 cents to $2.25/bu over the September future. The high end of the reported trading range for 14% protein was up $1.05/bu to $2.90/bu over the September while the upper end of the trading range for 15% was up $1.75/bu to $5/bu over the September future. The September closed at $6.12 3/4 cents on Tuesday.

This is a remarkable one-day move and could signal what's to come.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

(CZ/SK)

Posted at 5:19PM CDT 08/27/14 by Cliff Jamieson
Comments (1)
This is interesting with OK State's Kim Anderson saying; "Reports indicate that the average hard red winter (HRW) wheat protein in Texas, Oklahoma, and Kansas is about 14 percent. Millers report that 14 percent protein HRW wheat is an unprecedented problem. Reports indicate that the nearest acceptable protein wheat (in large quantities) is in northwest Nebraska. The protein premium is inverted as lower protein HRW wheat has higher demand than relatively high protein HRW wheat." It seems this price inversion of lower protein HRW wheat might keep HRW wheat out of the feedlot in the South - maintaining corn demand. Currently, it seems the premium for high protein wheat; not a discount for low protein, along with the sever discounted basis for corn should/might also keep wheat from returning to the feed channels in the North. Some diseased SRW will be fed but the level of inclusion in the ration is limited because of animal health issues. As it now looks, wheat will not replace corn (to a great degree) in feeding rations- as least in the US. Freeport, IL
Posted by Freeport IL at 8:35AM CDT 08/29/14
 

Monday 08/25/14

SD Shipper: "No Train, No Grain"

OMAHA (DTN) -- Oahe Grain in Onida, S.D., has been full since Aug. 14 and had been expecting a train from the CP, but it was a "no show."

The driveway at Oahe Grain, in Onida, S.D., is empty with no railcars to load out full bins. (Photo by Tim Luken)

"If and when the train does get here," manager Tim Luken told DTN via email on Aug. 20, "we will load 25 cars, 85,000 bushels of spring wheat. That will be enough to run us for 5 hours and then fill again.

"There are farmers that have their trucks full and waiting for us to get room again," said Luken. "Some producers have run out of room and now the only room left is at elevators. The RCP&E Railroad is doing the best they can with the resources the CP is giving them. This isn't going away anytime soon either."

Every single Midwest Cooperatives elevator is full, Jeremy Frost, grain merchandising manager told DTN via email on Aug. 22. Midwest Cooperatives has locations at Pierre, Onida, Blunt, Philip, Kadoka, Draper and Highmore, all in South Dakota, and is associated with CHS Inc. The elevator is served largely by the Rapid City, Pierre & Eastern Railroad based at Rapid City, S.D., which was sold to Genesee & Wyoming Inc. on May 31, by Canadian Pacific Railroad, but relies on CP to drop rail cars for shippers on the line.

"We're just starting spring wheat and piling it on the ground in Pierre and are looking for other locations to pile it," Frost said. This is on top of the winter wheat, approximately 150,000 bushels, that was piled in Pierre in late July and still sits there.

Frost said some of his farmers are taking wheat south to Nebraska. "Some are going further north with their wheat and others are putting it in bags and piles," he said. "Typically, they'd make a 50-mile round-trip to sell grain and now it's easily 150 miles or more."

Keith Brandt, manager of Plains, Grains and Agronomy located on the CP in Enderlin, N.D., told DTN, "Loading a June 2 shuttle. Have mid-April 25 car and single orders not filled. It's going to be a long fall."

Farther north, Jeff Kittell, manager at Souris River Cooperative on the CP in Lansford, N.D., said nothing has changed for him since he talked to DTN one week ago. "Still waiting on March orders, but we are 'supposed to' see a train this week for weekend loading." He is still concerned the CP may not fill the older orders.

NORTH DAKOTA SENATOR ASKS STB TO HOLD HEARING

North Dakota Senator George B. Sinner, Democratic-Nonpartisan League Party nominee for North Dakota's sole Congressional seat in the U.S. House of Representatives, told DTN via email that he encouraged the Surface Transportation Board to return to North Dakota for a public hearing over the rail backlog. Sinner said the STB "has accepted my invitation to return to North Dakota and reassess the very serious rail backlog situation that has affected farmers across our state."

Sinner told DTN, "This hearing is an opportunity for the STB to hear from shippers and see that the progress made by the rail companies still isn't enough to alleviate the pressure and loss of revenue being placed on farmers today. Harvest is here, and our farmers can't wait any longer for action. We look forward to having the STB in North Dakota and discussing real, common sense solutions." Sinner has been a staunch advocate for grain shippers in North Dakota facing the ongoing transportation issues caused by the railroad backlogs. Here is the public notice by the STB announcing the hearing on Sept. 4: http://goo.gl/…

The BNSF said in their weekly service announcement on their website that good progress in decreasing the number of past-due car orders for agriculture customers continued. "U.S. past-due orders are now at 2,609, at an average of 12.9 days late. Likewise, coal customers experienced higher average daily coal deliveries for the week at 744,000 tons, up 30,000 tons delivered compared to the prior week, and nearly 22% higher than our baseline week in early February."

The BNSF said that for the week ending Aug. 19, network fluidity statistics were somewhat mixed. "Despite these mixed results, we continue to make good progress in key areas. Terminal dwell was 28.9 hours for the week ending Aug. 15, which is better by 2%, or a half-hour, compared to the prior week.

"Train velocity was flat compared to the prior week at 14.6 miles per hour. Trains holding for power increased 10% week over week, driven by a 49% increase in the South Region caused by weather-related issues in the southwest and previously planned maintenance and capital projects. Nonetheless, compared to our baseline week in early February, trains holding remains down 31.2%."

Here is the link for the complete BNSF service report on Aug. 22 to STB: http://goo.gl/…

USDA CALLS POOR RAIL SERVICE A "CRISIS"

In a letter on Aug. 22, USDA filed reply comments to the Surface Transportation Board on the board's current rail rate challenge procedures and also reported the losses suffered by poor rail service since January 2014.

USDA pointed to a North Dakota State University study that estimated a $67 million loss in North Dakota farm level revenue for crops that were sold from January through April. In addition, the study estimated another potential $95 million loss in farm revenue if crop basis levels did not improve. USDA said another study estimated delays in railroad shipping have cost Minnesota corn, soybean, and wheat farmers nearly $100 million and have cut deeply into the value of grain still in storage.

"The losses occurred because of unexpected increases in transportation costs, such as skyrocketing costs of grain cars on the secondary railcar market that peaked at $6,000 per grain car, and other transportation-related costs associated with the rail service crisis," USDA stated. "Early on, some of these additional costs were likely borne by the exporter through reduced margins, but as the situation progressed, were more likely reflected in the prices paid to producers for their crops." The entire USDA filing to the STB can be seen here: http://goo.gl/…

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/CZ)

Posted at 10:43AM CDT 08/25/14 by Mary Kennedy
Comments (4)
More farming, higher yields, lack of investing in infrastructure to move products = "train wreck"
Posted by GWL 61 at 12:59PM CDT 08/25/14
Good one, GWL. Political prevention of infrastructure. It may not seem a direct cause, but energy transporting via pipelines would solve much. But then, one can not use them if construction has not kept up to the need.
Posted by Bonnie Dukowitz at 5:28AM CDT 08/26/14
Our area the saying is NO RAIN NO GRAIN don't need TRAIN
Posted by Raymond Simpkins at 10:06AM CDT 08/26/14
Pastures full of pairs, feed yard full of fats, - 92 basis fall delivery corn, you have got to love this country! Rex Binger Tulare South Dakota
Posted by Unknown at 4:28PM CDT 08/27/14
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Recent Blog Posts
  • Daily Price Limits to Shrink Over Weekend
  • Weekly Rail Updates Disappoint Shippers
  • Acreage Arguments
  • Crude Crashes to 4 Year Lows
  • STB "Ups the Ante" for Railroads
  • Informa Pegs Bean Production Above 4 Billion Bushels
  • Senators Request USDA Study on Rail Service Delays
  • Industrial Reports to Make a Comeback in 2015
  • Elevators Full; Grains Get Grounded
  • Barge Freight Surges Higher
  • A Demand Optimist
  • Elevator Manager: Fall Harvest Could Be "Complete Disaster" Without Rail Cars
  • A Full Notebook
  • Is Tuesday's Minneapolis Cash Trade a Sign of Things to Come?
  • SD Shipper: "No Train, No Grain"
  • StatsCan Reports Canadian Production to fall Below Expectations
  • Rail Backlogs Continue
  • Harvest Storage, Transport Worries
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  • Upper Mississippi River Closed Again