Market Matters Blog
Katie Micik DTN Markets Editor

Tuesday 11/25/14

Early Winter Weather Adds to Rail Problems

The early onset of winter-like temps and precip in the Midwest and Northern Plains led to delays and problems for rail traffic in the past week.

A CN grain car tagging along behind an oil train. (DTN file photo by Mary Kennedy)

In a weekly service update to customers, the BNSF railroad (Burlington Northern Santa Fe) reported, "The operation experienced some velocity challenges this week due primarily to frigid conditions continuing to impact the North and Central Regions. This unseasonably cold weather caused some modest traffic slowdowns as well as some negative effects on network fluidity."

However, BNSF officials do not expect the weather-related problems to continue for long. "With network infrastructure adapting quickly to this early winter environment, we expect a continued improvement in train flows and car velocity heading into December," BNSF stated.

Two derailments on Nov. 13, one in Casselton, N.D., and one on the Montana Rail Link line, also disrupted service last last week on the BNSF.

"Due to the incidents, we implemented some rerouting of trains to alleviate backlogs on affected subdivisions. Train flows and routing through this area have returned to normal," the weekly service report stated.

"With the strong volume of traffic that daily uses this line, traffic was staged through last weekend," said John Miller, BNSF ag vice president, in his weekly podcast. Staged means trains are holding, waiting to move into a terminal, due to backed up traffic.

Both the BNSF and Canadian Pacific (CP) have recently experienced service disruptions in the Pacific Northwest due to an ongoing labor situation at the ports, along with excessive traffic creating slowdowns. "We have responded by implementing temporary restrictions for some export/import traffic at several of our hubs," BNSF stated. "While hoping for a resolution in the near future, BNSF will continue to evaluate and, in some cases, implement additional procedures to minimize impacts on service."

The CP told the Surface Transportation Board in its weekly update, "As we indicated last week, overall congestion has improved in the Pacific Northwest supply chain, in particular on the offline component of this corridor. We expect grain car cycle times for completed trips to begin to improve over the next several weeks as the supply chain works through this re-set."

Overall cars due in the US from BNSF were at 6,321 and were 13.3 days late, the railroad reported. Of that total, cars due in North Dakota totaled 3,340 and were on-average 14.1 days late and 1,112 were due in Montana and were 13.1 days late. Shuttle turns per month to the PNW improved slightly from the previous week to 2.3 TPM.

The number of outstanding car orders in North Dakota owed by CP were at 2,684and were 2.94 weeks late, according to CP. Cars owed in Minnesota were at 374 and were 1.26 weeks late and cars due in Montana were at 150 and were 2.67 weeks late. Grain shuttle (or dedicated grain train) round trips for the PNW region were at 1.62 during the past month.

Here is the link to all Class 1 Railroad updates to the STB on 11-19-14:…


While Canadian railroads have made some progress in moving grain, some are still not meeting the required minimums set by the government. The Manitoba Co-operator reported a member of Parliament said the railroads "have not hit their targets for three weeks and no fines have been issued, not a single one."

"An enforcement process is underway, given CN's failure to meet the minimum grain volume requirements," Jeff Watson, parliamentary secretary to the minister of transport, told the Manitoba Co-operator. "That company is in fact facing fines and the enforcement process, as I said, is underway."

With the rules governing the weekly minimum grain volumes set to expire at the end of this month, concerns are mounting across producer groups and shippers.

"In 2013, weekly movement fell off the rails in week 12 or the week of October 27 and didn't recover until after mandated volumes were introduced by the federal government," wrote DTN Canadian Grain Analyst Cliff Jamieson. "Concerns are growing that rail service could deteriorate should minimum volume mandates be allowed to expire. An informal DTN 360 Poll resulted in 68% of respondents suggesting that the mandates should not be allowed to expire but rather, should be viewed as an important first step in improving rail service for farmers."

"Changes to the car-ordering system operated by Canada's two railways were highlighted in last week's press. In September, CN made changes to allow orders to be placed for just two weeks out, while in late October CP changed their system to allow for orders to be placed for a four-week window. This move is in stark contrast to the past where there were no limits placed on orders which resulted in a growing number of unfilled orders. Neither railway feels that this change in procedure will hamper their efforts to meet the weekly targeted volumes."

Mary Kennedy can be reached at

Follow Mary on Twitter @MaryCKenn


Posted at 12:14PM CST 11/25/14 by Mary Kennedy

Monday 11/24/14

UMR Shipping Season Comes to Close

OMAHA (DTN) -- "The Mississippi River will always have its own way; no engineering skill can persuade it to do otherwise," said Mark Twain. Mother Nature, too, has her own way and decided it was time to close the Upper Mississippi River for this shipping season until next spring.

Barges struggle to move through the ice-filled Mississippi River near Dubuque, Iowa, on Nov. 20, 2014 (Photo by Brad Hanson, KWWL News, Dubuque Bureau)

The U.S. Army Corps of Engineers, St. Paul District, said on Nov. 20 that they locked the last tow of the season for the St. Paul, Minn., area because ice conditions on the Mississippi River were making it hard for vessels to navigate.

According to the USACE, "The Motor Vessel Mary K Cavarra was locked through Lock and Dam 2, near Hastings, Minn., with four barges. Traditionally, the last tow heading south of Lock and Dam 2 has marked the unofficial end of the navigation season for the Twin Cities portion of the St. Paul District." This closing came earlier than normal and many elevators in that area scrambled to get their last barge loaded and sent downriver before it closed. The Gavilon elevator at Red Rock had posted this on their website last week: Special Message from Gavilon Grain - Red Rock: river closing early...bring all bean deliveries by this Sunday, Nov. 16.

The Mid-Mississippi corridor is expected to close at the end of November, unless the icing becomes a bigger issue downriver. KWWL, Dubuque, Iowa, reported, "At least four or five boats north of the Guttenberg Lock and Dam early Nov. 20 struggled to break through the ice." Lockmaster Marvin Althoff told KWWL, "It's a long and painfully slow process. The ice isn't new, but the timing is causing headaches. This is a little more ice than we normally have at this time of year on the river," he said. "As a result, we have a lot more tows up above that are wanting to get out yet and there are 22 boats navigating some pretty thick ice -- up to 8 inches thick in some places in the Mississippi River."

If you remember this past spring, the navigation season didn't officially start until April 16 when the Angela K reached St. Paul, Minn. The USACE said, "The spring start was one for the record books with ice thicknesses in Lake Pepin, near Red Wing, Minn., reaching 32 inches in some locations. This season was the second latest start to navigation in the district's history, too."

"Despite the late start and needing to close the 9-foot channel for 26 days in at least one location to perform emergency dredging after the June floods, the cargo tonnage is up more than 10% at the mainline locks from Hastings to Lock and Dam 10 in Guttenberg, Iowa," said Bryan Peterson, St. Paul District Mississippi River program manager. "Industries saved more than $300 million by using the navigation channel instead of overland shipping methods."

Mike Steenhoek, executive director of the Soy Transportation Coalition told the Minneapolis Star Tribune, "Corn and soybean growers within 70 miles of a river terminal usually find it economical to send their grain to river terminals, unless they sell it closer to home for animal feed, ethanol plants or other uses. But the recent delays, shortages and high costs to move export grain by rail are driving more business to barges. Normally, some grain handlers will say that the river's too far away and it just doesn't pencil out," Steenhoek said. "But with rail service being what it is, they're willing to drive further to access the river."

But now, that will all come to an end until next spring thanks to Mother Nature who decided to bring an early start to winter in the Midwest.

Mary Kennedy can be reached at

Follow Mary Kennedy on Twitter @MaryCKenn


Posted at 1:43PM CST 11/24/14 by Mary Kennedy

Monday 11/17/14

PNW Shuttles Slowed This Week by Cold, Snow; Casselton Derailment Adds to Slowdown

The early arrival of winter weather with record cold and snow in parts of the Midwest and Northern Plains slowed rail transportation of agriculture products this past week, according to one railroad official.

Cold and snow across northern parts of the U.S. this past week caused service interruptions on BNSF routes, according to company officials. (Courtesy photo by Roy Luck)

In the BNSF weekly podcast Friday, John Miller, BNSF's ag vice president, said, "Our manifest train size as well as crew van restrictions due to snow and road conditions in the north have been impacted." The weather affected the capital tier replacement along the Northern Corridor, causing major service interruptions this past week, he added.

The BNSF website reported that the operation was affected by the winter weather that hit much of the north and central regions of the country this past week. All-time record-cold temperatures for November were set in many locations, including some that had stood for over a century. While operation performance remained steady during the early portion of the week, there were some effects on network fluidity due to the unfavorable conditions.

Miller said that "while the pipeline to the PNW export facilities is down 10% week over week, daily deliveries by the BNSF continues to be seven to nine trains per day." He added, "Trains staged at the PNW have been moderate this past week and will remain so over the weekend."

According to the BNSF podcast, October was a record month for ag volume to the Pacific Northwest (PNW), setting records in North Dakota, South Dakota, Minnesota and Montana combined. Miller did say that shuttle turns per month (TPM) were not at the desired 2.5 to the PNW, but "our service is more consistent." That was in reference to the track improvements made by the BNSF in recent months along the northern corridor, expanding capacity. Miller also said that the BNSF will remain focused on servicing non-shuttle customers as well.

However, the weekly BNSF service update to customers stated that, "In addition, the labor dispute affecting operations at ports in the Pacific Northwest and California remains an ongoing issue. With work slowdowns causing some disruption to export/import traffic, BNSF will continue to evaluate and, in some cases, implement procedures to minimize any impacts on service."

The podcast was aired prior to the most recent setback, a two-train derailment at Casselton, N.D., Thursday night. The Grand Forks Herald reported that, "No one was injured when 12 to 13 empty crude oil cars from a westbound train and an unknown number of cars from an eastbound train carrying lumber derailed Thursday." The BNSF reported on their website Nov. 15 that, "The first track was put back into service at 09:35 p.m. Central Time on Nov. 14, 2014. The second track was put back into service at 11:50 p.m. Central Time on Nov. 14, 2014. Customers may experience delays of 36 to 48 hours on shipments moving through this corridor." This was unwelcome news for shuttle loaders east of the derailment who have reported slow turn times, which is also evident in the falling secondary freight costs that, as of Nov. 13, were at zero for the last period for November and at $0/$200 per car for December.

The BNSF reported that system-wide, cars owed are at 6,395 and on average are 14.5 days late. North Dakota is owed 3,139 cars and is 16 days behind; and Montana is owed 1.059 cars, 12 days behind. Here is the link to the BNSF and all Class 1 railroad service updates to the STB on 11-12-14:…


The cash ethanol market has been rising, partially due to rail logistic problems in both the East and West Coast markets. George Orwell, DTN/The Progressive Farmer energy reporter, said that, "Trade sources talked of a lack of rail capacity, especially for the West Coast, and a winter snowstorm in much of the country that made it difficult to deliver supplies to destination markets. Logistical problems across the country are keeping some trade hubs from being supplied adequately and on time."

According to the BNSF update to the Surface Transportation Board on Nov. 13, there were 100 loaded cars of ethanol and 128 empty ethanol cars that had not moved in greater than 120 hours during the week of Nov. 2 through Nov. 8. The total for ethanol cars not moved in greater than 48 hours but less than 120 hours was 915 loaded and 1,032 empties.

The Minneapolis Star Tribune newspaper reported on Nov. 16 that electric utilities that serve Minnesota say they still aren't getting enough coal. The article said that, "Two power companies that serve northern and western parts of the state have halted or reduced power generation at five coal-burning units. Almost all utilities are entering the winter with below-normal coal stockpiles that some executives say put the reliability of the electrical grid at risk. They blame persistent delivery problems at BNSF Railway, the major hauler of western coal burned in the Midwest. The railroad has struggled for a year to deliver traditional commodities like coal, fertilizer and grain while hauling increasing amounts of North Dakota crude oil." Electric utilities, which have long-standing relationships with BNSF, agree that the railroad is working hard. But they say it isn't enough, according to the article.

According to the Association of American Railroads (AAR), during January-October 2014, rail shipments of coal were up a relatively small 0.3% from the same period last year. "Coal is still by far the largest commodity volume moved by rail, with 4.9 million car loadings," said the AAR. "Power plant operators are seeking more coal deliveries by rail to rebuild their coal stockpiles, which were drawn down during last winter's colder-than-normal weather."

In its weekly service update to the STB, the BNSF reported there were 452 loaded cars of coal and 795 empty coal cars of that had not moved in greater than 120 hours during the week of Nov. 2 to Nov. 8. The total for coal cars not moved in greater than 48 hours but less than 120 hours was 995 loaded and 1,151 empties.

The BNSF told the Star Tribune that the railroad is taking major steps to improve service, including capital investments in track upgrades, as well as logistical moves to speed up deliveries. "We are in regular communication with our customers, working with them directly on their most urgent issues, and we are making progress in continuing to grow coal stockpiles," the BNSF said in a statement to the newspaper.

According to the Star Tribune, Minnesota's U.S. senators, Al Franken and Amy Klobuchar, and Gov. Mark Dayton have asked the Surface Transportation Board to require BNSF to file a "coal service recovery plan" with the government, a move the railroad strongly opposes. The Western Coal Traffic League, a trade association for coal shippers, and several other utilities have joined in the call.

"Winter is here for all practical purposes," Franken told the Star Tribune in an interview. "We're still digging our way out of backlogs caused by the extreme cold of last winter. There have obviously been increased shipping demands because of the crude. So this is a problem, and they need to address it."

The BNSF told all of its customers at the end of October that it will go into the 2014-15 winter season better prepared than ever before, especially if the United States experiences a return of the polar vortex. "The 2013-14 winter was one of the most severe winters the United States has experienced in decades with extreme temperatures that persisted for long periods and created special challenges for operating the railroad," said the BNSF. Here is the link to their Winter Preparations and Plans:…

Mary Kennedy can be reached at

Follow Mary Kennedy on Twitter @MaryCKenn


Posted at 12:33PM CST 11/17/14 by Mary Kennedy
Comments (1)
So why do Franken, Klobuchar and Dayton quite patronizing both coast enviros, and get a few pipelines built?
Posted by Bonnie Dukowitz at 6:10PM CST 11/17/14

Tuesday 11/11/14

Snow Snarls Harvest

The television monitors at Reagan National Airport looked like they were bleeding. Two thirds of the inbound flights faced delays related to this year's first big snowstorm, and I crossed my fingers that my flight route through Atlanta would get me home.

Many farmers woke up this morning feeling the same way -- hoping they'd still have time to finish up harvest before the death knell of a snowy winter.

Fortunately, I made it home without a hiccup. It looks like farmers have a pretty good chance of finishing harvest, too.

Monday's crop progress report shows that corn harvest is 80% complete, a far cry from where it was in 2009 -- the last record corn harvest. In fact, most major corn states are light years ahead of where they were in 2009. Check out the table below comparing the harvest completion percentages for those years.

State 2009 2014
IL 31 87
IN 41 71
IA 34 82
MI 16 34
MN 23 90
NE 30 79
ND 3 73
OH 37 67
SD 18 84
WI 23 50

"Greatest issues this year are in Michigan and Wisconsin -- but even in those states, harvest is more than double its percent progress compared with five years ago," DTN Senior Ag Meteorologist Bryce Anderson said. "And the Minnesota and North Dakota totals are obviously far, far better than back in 2009."

He said the forecast is cold and dry next week, so farmers are still likely to make more progress before winter shuts them down for good. DTN Cash Grains Analyst Mary Kennedy spent some her career in northwestern Wisconsin, and she thinks some corn could be left standing over the winter. But it's also not unusual in that area.

Wisconsin's crop progress report made for some interesting reading. Its headline: Farmers Race Oncoming Snow.

"Farmers were scrambling this week to get fieldwork done before oncoming winter weather. Rain and snow events late in the week interrupted fieldwork and drove up grain moistures in the eastern portions of the state. This precipitation made for slick field conditions and wind reportedly lodged standing corn in some areas. However, conditions across the rest of the state were much drier, allowing good progress on fall fieldwork. With substantial snow and much colder weather in the forecast, reporters were concerned about the amount of corn and soybeans still to be harvested and the amount of manure still to be spread. Several reporters noted farmers working through the night to clear fields while conditions allowed. The corn silage and soybeans harvests were nearing completion, as was winter wheat planting. Grain driers were going full blast across the state but some producers were reportedly still delaying their grain corn harvest until moisture content falls naturally." (You can find the whole report here:…)

I'm glad I made it home from Monday's USDA lockup, and I hope farmers can say the same about this year's corn harvest.


Posted at 9:55AM CST 11/11/14 by Katie Micik

Monday 11/10/14

Weekly Railroad Updates Show Mixed Results in Service Improvements

OMAHA (DTN) -- The large volume of soybeans moving from the upper Midwest for export is causing delays in rail shipments to the U.S. Pacific Northwest, according to Canadian Pacific railroad's weekly service update to the Surface Transportation Board.

Canadian Pacific locomotives on track near southern Saskatchewan. (DTN photo by Elaine Shein)

"Our railroad does not reach the PNW," said the CP, "so transportation from origin to the destination for this traffic is dependent upon fluid movements through the entire supply chain." The CP routes its trains destined to the PNW from Minnesota, North Dakota and South Dakota through Kingsgate, BC, and then on to the Union Pacific railroad in the U.S.

"Car cycle times for both our manifest and dedicated grain trains involved in this PNW traffic have grown over the last several weeks due to off-line congestion in the supply chain. This has been particularly pronounced for our dedicated trains where CP trains are being held at loading origins, as well as being staged on sidings across our network, en-route to interchange. We are working closely with destination terminals and connecting roads to manage train slots and maintain network fluidity as the supply chain works through these challenges. As a consequence of this effort, we are beginning to see an increase in consistent and timely train delivery at interchange locations."

The CP reported the weekly average terminal dwell time measured in hours, excluding cars on run-through trains, was 19.4 versus 18.3 the prior week. CP reported 32,682 cars on the line for the week, which included 15,966 covered hoppers and 9,826 tank cars. The weekly total number of loaded cars in revenue service that have not moved in more than 120 hours was three for crude oil, zero for ethanol and 134 for grain. Outstanding car orders in North Dakota were at 2,324 versus 2,529 the prior week, 210 in Minnesota versus 304 the prior week and 200 in Montana versus 104 the prior week. Here is the link to the entire CP service update to the STB on Nov. 6:…

The BNSF also reported slowdowns in the Pacific Northwest. In its weekly update to customers, the company said, "We also continue to monitor the labor slowdowns affecting operations at ports in the Pacific Northwest. While effects on service have been manageable to this point, BNSF will continue to evaluate and, in some cases, implement new procedures to minimize any impacts on service throughout the network." The ports of Seattle and Tacoma are reporting labor "slowdowns" in recent weeks as the International Longshore & Warehouse Union continue to negotiate a contract with the Pacific Maritime Association.

The BNSF said it is also wrapping up work on several major projects across the North Region ahead of the winter. "We anticipate that the first blast of Arctic air will arrive across the upper Midwest and Northern Plains next week (week of Nov. 10). This early season cold snap will bring temperatures as low as the 10s and 20s in some areas, as well as the chance for accumulating snow, starting Monday. This week, we completed an additional eight miles of double track on our Glasgow Subdivision, which runs from Minot, N.D., to eastern Montana. Maintenance work in the Dilworth, Minn., area is also ending, while work along the Minneapolis/St. Paul to Chicago main line is scheduled to finish in early December." BNSF's weekly service advisory can be found here:…

Here is the link to see all of the Nov. 5 Class 1 railroad service updates to the Surface Transportation Board:…


The mandate issued by the Canadian government to railroads requiring them to move 500,000 metric tons of grain weekly or be fined, will expire on Nov. 29. There has been talk that the mandate may be allowed to expire, which is not sitting well with farmers and grain shippers, especially those who don't ship the large-unit trains that railroads prefer to move.

A short line in western Canada told DTN that shuttle loaders get their car orders, but when it comes to smaller units, it is difficult to receive them in a timely manner, and none of their shippers can get all the cars they want when they want them.

A farmer who is serviced by a short line in southwestern Canada said that while service has improved slightly, the biggest problem his short line is facing is they are still trying to clean up old orders. Because of that, grain companies wanting crop for their milling customers are relying on truck movement instead of rail because they can't depend on the rail service going to U.S. destinations, which hurts business on the short lines.

Short-line railroads would like to see the north/south movement addressed under the current legislation and also change the order to require railroads to deliver cars to the corridors that are currently coming up short on their orders. The Leader Post reported in a statement issued by Canada Agriculture Minister Gerry Ritz's office Tuesday, "Minister Ritz has stated that no decision has been made with respect to volume requirements. The ministers of transport and agriculture will receive advice from the CTA (Canadian Transportation Agency) and will make a decision in due course."

Regardless of the outcome on Nov. 29, it appears that this issue will continue to be a contentious one and, in the end, the smaller shippers and farmers that rely on them may continue to be the ones suffering the most.

Mary Kennedy can be reached at

Follow Mary Kennedy on Twitter @MaryCKenn


Posted at 2:03PM CST 11/10/14 by Mary Kennedy
Comments (1)
Mary; Would completion of the oil pipeline thru the US allow oil to be shipped using that method, thereby freeing up trains and track for farm products ?
Posted by Dick Doriguzzi at 7:05PM CST 11/11/14

Friday 11/07/14

Sudden Closure, Dredging Slow Lower Mississippi Traffic

OMAHA (DTN) -- Daylight closing of a section of the lower Mississippi River for approximately two weeks could not have come at a worse time.

Grain barges moving downriver increased 13.6% from the previous week. (Chart courtesy of U.S. Army Corps of Engineers)

Ingram Marine Group reported on their website that the Mississippi River will be closed from mile 632 to mile 635, near Memphis, during daylight hours for potentially 14 days for mat-laying operations starting Friday, Nov. 7. The mats, made of concrete blocks that are strung together to hold them in place, are designed to prevent erosion of the river's banks and to protect key features of the submerged riverbank, according to the U.S. Army Corps of Engineers (USACE).

The problem is many shippers were unaware this was going to happen and the work could greatly impact grain moving down-river and other commodities moving up-river during a busy harvest season and ahead of the looming winter closure of the Upper Mississippi River. The winter season normally begins in the Twin Cities and Mid-Mississippi River Districts by mid-December, but most barges will be moving south by late November so as not to get stuck if early ice becomes a problem.

The National Corn Growers Association sent a letter to the Army Corps requesting they delay the project. "We fear the closure will result in significant delays of grain shipments with potential to create backups as long as 75 miles," the letter stated. "A delay of this magnitude will have a significant financial impact on farmers, who already face prices below the cost of production." (You can read NCGA's statement here:…)

As far as basis levels being affected by the slowdowns, the Gulf corn basis has been weaker mostly due to lack of nearby demand, and the Gulf soybean basis has been steady. Lower barge freight costs have been a factor, but any delay in shipping barges headed for waiting vessels at the Gulf could be costly for shippers and barge lines in the long run.

Soybeans account for much of the barge traffic moving down-river to the Gulf on both the Ohio and Mississippi rivers, according to the USDA Grain Transportation report. "Data provided by the U.S. Army Corps of Engineers show that for the week ending November 1, soybeans represented about 82% of downbound grain tonnages; corn was 15%. Based on the five-year average, soybeans are 50% and corn is 47% of the total downbound tonnages during the fourth quarter. Barge operators have indicated that corn shipments are expected to pick up early next year."

This latest slowdown on the river is in addition to the current dredging near Lock 27 around St. Louis, which is causing limited passage during dredging operations. The dredging is done at night and may be completed by November 9. According to the USACE, "the dredging is an annual activity that ensures the navigation channel is clear from sediment buildup left by the natural flow of the Mississippi and rainfall runoff." Here is a link to the USACE news release about the dredging operation:…

USDA also reported that as of November 1, year-to-date grain barge tonnages are 13% higher than the five-year average and the highest since 2010. "Current river conditions are adequate for navigation but a drop in levels may cause shoaling situations where dredging is needed. Barge rates remain above average in early November, with the highest rates in the Mississippi River Locks 15 area, near Davenport, Iowa, where rates are about $46.71 per ton for export bound grain (70% higher than the five-year average)," said USDA.

The Ingram Marine Group website reported the following river levels as of November 7:

Upper Mississippi River:

- Saint Paul: 3.42 feet, steady.

- Dubuque: 8.48 feet, steady.

- Burlington: 8.7 feet, steady.

- Louisiana: 11.97 feet, steady.

- St. Louis: 7.68 feet, falling.

- Cape Girardeau: 15.8 feet, falling.

- Thebes: 14.63 feet.

Lower Mississippi River:

- Memphis: 3.36 feet, falling.

- Vicksburg: 14.98 feet, steady.

Mary Kennedy can be reached at

Follow Mary Kennedy on Twitter @MaryCKenn


Posted at 2:58PM CST 11/07/14 by Mary Kennedy

Wednesday 11/05/14

CFTC Fixes Ag Concerns on Residual Interest

The leadership turnover at the Commodity Futures Trading Commission is proving to be a good development for agriculture. On Monday, the four commissioners -- three of which are new to the office -- unanimously agreed to remove a provision of the controversial customer protections rule that would have forced futures users to pre-fund potential margin calls.

This is the "residual interest" problem that brokerages catering to agriculture clients resisted so loudly more than a year ago. As written in the final rule, futures commission merchants were required to move the calculation of residual interest -- how much of the FCM's own funds needed to be contributed to hedge accounts to cover any missing margin payments -- from the close of business the day following the trade to 9 a.m. the day following the trade, starting in 2018. The rule required CFTC to conduct a feasibility study, but set an automatic deadline on the change that could only be overturned by a vote of the CFTC commissioners. Monday's action removes the automatic deadline.

"The deadline will still move to 6:00 pm as of November 14 of this year, and we will still conduct a study of the practicability of making the deadline earlier," CFTC Chairman Timothy Massad said in his opening statement at public meeting on Monday. "An earlier residual interest deadline better protects customers from one another, in line with the statute, but we want to make sure we move deliberately so that the model works best for customers in light of all of their interests, since the deadline will affect how much margin customers have to post and when."

The revisions have been published in the Federal Register and there's a 60-day comment period before the rule becomes final.

If you recall, the CFTC's customer protections rule was aimed at finding solutions to the problems that led to millions of dollars of end-user capital being tied up in MF Global's bankruptcy. During CFTC's investigation of the incident, the CFTC commissioners seemed amazed that as long as the total margin of all an FCM's customers met the total required, the FCM was deemed in compliance. That meant that some customers who had excess margin in their accounts covered for the customers with inadequate margin, which isn't how CFTC interpreted the Commodity Exchange Act. CFTC took steps to make sure that doesn't happen, and instead required FCMS -- the firm that places the buy or sell order with the clearinghouse -- to use their own capital to top up accounts that came up short, called residual interest.

In an advisory issued Tuesday, the National Grain and Feed Association noted that FCMs have told the group the new 6 p.m. deadline would not force pre-margining. It also brings the rule closer in line with a CFTC reauthorization bill passed by the House of Representatives earlier this year.

Perhaps the most notable factor behind this change is the persistence and outreach of industry groups like NGFA. The three new members of the CFTC -- Massad, Sharon Bowen and Christopher Giancarlo -- have no agriculture background but wide experience in the realm of swaps and derivatives. Mark Wetjen, the remaining commissioner, grew up in Iowa and have relatives that farm.

NGFA reached out to the new commissioners to help educate them on how agriculture and agribusiness works. Given Giancarlo's opening statement at Monday's meeting, it's pretty clear NGFA and other agriculture groups' efforts are working. Here's a portion of what he said:

"I support the issuance of the proposed rule before us on the residual interest deadline for futures commission merchants (FCMs). Without it, the so-called and, perhaps, misnamed "customer protection" rule finalized in October 2013 would likely result in significant harm to the core constituents of this Commission: the American agriculture producers who use futures to manage the everyday risk associated with farming and ranching.

"As it stands, the rule will cause farmers and ranchers to prefund their futures margin accounts due to onerous requirements forcing FCMs to hold large amounts of cash in order to pay clearinghouses at the start of trading on the next business day. Without revision, the increased costs of pre-funding accounts will likely drive many small and medium-sized agricultural producers out of the marketplace. It would likely force a further reduction in the already strained FCM community that serves the agricultural community.

"Last week, I visited a grain elevator in southern Indiana and a family farm in rural Kentucky. I had lunch with around a dozen small family farmers, some of whom use futures products to manage price and production risk. Simply put, they could not fathom why the CFTC would adopt a rule requiring them to pre-fund margin accounts. They saw our rule as insuring that they would actually lose MORE of their money --- not less -- in the event of a future failure of another MF Global or Peregrine Financial."

The Senate Agriculture Committee is likely to take up the task of reauthorizing the CFTC in the next two years, and it will be interesting to see if this new, stronger relationship between agriculture and its regulators stands the test of time.


Posted at 11:13AM CST 11/05/14 by Katie Micik

Tuesday 11/04/14

Informa Sees Corn Crop at 14.49 BB, Beans at 3.99 BB

OMAHA (DTN) -- Private analytical firm Informa Economics tweaked its estimates for U.S. corn and soybean production a little higher than last month in a report released Tuesday morning.

Informa pegged corn production at 14.493 billion bushels, 18 million bushels more than USDA forecast in October.

The national average yield estimate, at 174.4 bushels per acre, is just 0.2 bpa higher than USDA's latest estimate. If realized, the yield estimate would surpass the 2009 yield record by more than 10 bpa. Informa now pegs Illinois corn yield at 202 bpa, up 2 bpa from October.

Soybean production is expected to climb by 64 mb to 3.991 bb from last month's USDA estimate. Informa pegged the national average yield at 47.9 bpa, up from 47.1 bpa last month.

"Informa's estimates were close enough to October's USDA numbers that there was little market reaction on Tuesday," DTN Analyst Todd Hultman said. "The estimates continue to confirm record corn and soybean harvests and a bearish fundamental outlook for corn and soybean prices."

Informa also expects USDA to increase its cotton and grain sorghum production estimates when it releases its next Crop Production and supply and demand reports on Monday, Nov. 10, at 11 a.m. CST.

While Informa didn't release any specific estimates for U.S. wheat, it noted that Nebraska's received 161% of its average rainfall while Kansas has received 112%. While Texas and Oklahoma still trail their averages, Informa said winter wheat's progression is at or above normal with 90% planted and 77% emerged.

Informa also released its global crop report, pegging Brazil and Argentina soybean production at 93 million metric tons and 56 mmt, respectively. Informa's projection for Brazil is 1 mmt lower than USDA's October estimate while Argentina's forecast is 1 mmt higher.

Hultman doesn't think those numbers are a big market-movers just yet, but the market's attention will continue shifting to the South American crop when harvest winds down.

"The only thing I see among world estimates is that Informa is estimating Australia's 2014 wheat crop at 22.0 mmt versus USDA's 25.0 mmt, but they are also expecting a little more in Europe and Argentina, so there is little net effect," Hultman said.

"There may be room for USDA to trim its 2014 wheat crop estimate for Australia, based on dry weather, but that will not be enough to shake wheat prices from their current bearish outlook."

Katie Micik can be reached at


Posted at 3:25PM CST 11/04/14 by Katie Micik

Monday 11/03/14

Rail Delays Continue

OMAHA (DTN) -- Officials with the BNSF railroad acknowledged in their weekly report to the Surface Transportation Board that more grain cars are late for delivery than oil cars, but said that was not unexpected considering the railroad owns considerably more grain cars than oil cars.

A BNSF locomotive moving through northwest Minnesota along the Northern Corridor. (DTN photo by Mary Kennedy)

The BNSF reported of the loaded cars in revenue service that have not moved in greater than 120 hours, 615 were for grain, 60 for ethanol and 141 for crude oil. The weekly total number of unloaded cars in revenue service that had not moved in more than 120 hours was 696 for grain, 76 for ethanol and 188 for crude oil.

"There have been several comments regarding the difference in the number of cars identified as holding for more than 48 hours and more than 120 hours in the crude category and grain category," the railroad reported. "The BNSF grain fleet is much larger than the crude fleet, but more importantly, BNSF grain fleet has around 1/2 of the cars deployed in shuttles or unit trains. By comparison, the vast majority of crude oil cars move in unit trains, which are built for speed and efficiency. The manifest service will always have more holding time as cars move across the network into multiple yards along the route to be switched in and out of trains and ultimately delivered by a local train.

"Given the large number of single cars made available for grain deliveries, there will always be a higher number of overall grain cars for holding when compared to commodities that travel almost exclusively in trains."

The BNSF reminded the STB that the data includes trains that hit the report at any point in our network, rather than trains held "short of destination or interchange only."

"It is still important to keep in mind that just because a train has been held at a point on the BNSF network for more than the period contained in the request does not mean that the shipment will not be delivered in a timely manner," said the BNSF.

Past due cars overall were at 6,043 and were 12.2 days late with North Dakota owed 3,252 cars, 14.5 days late and Montana owed 698 cars, 12.4 days late.

Here is the link to the entire BNSF status update to the STB:…

There has been an increase of trains staged into the PNW, according to BNSF ag vice president John Miller in his weekly podcast. Staging refers to trains holding at a point on line for release to move into a terminal. "We will continue to push pipelines across the Northern Corridor to help reduce staging in the PNW. Our shuttle trips per month (TPM) rebounded to 2.3 overall and we remain committed to achieve a consistent 2.5 TPM for shuttles to meet the expectations of our customers during the harvest push."

Oahe Grain in Onida, S.D., is served by the RCP&E railroad, but has an agreement to load BNSF shuttles that come through the Wolsey, S.D., interchange, according to manager Tim Luken. This is where the RCP&E short line picks up the train with attached BNSF power and delivers it to Onida.

Luken said the BNSF shuttles have been a big help this harvest. "A week ago Monday we had a gift BNSF shuttle train that I traded FOB, which helped free up some well-needed corn room. We filled up on corn this past Tuesday, but I did trade another shuttle FOB for this coming week and am hoping to move more corn in the middle of this coming week. Shuttle freight has come down, which has helped."

The Onida elevator also received 75 cars from the Canadian Pacific (CP) last week, Luken said, which was the biggest car placement from them in months. The CP reported to the STB that out of 200 cars requested by the RCP&E from Oct. 20 to Oct. 26, 174 were filled. Luken was grateful to get the cars because he was able to load out enough grain to free up a 100,000 bushel bin for sunflowers. With harvest still going on, he said that bin filled up in two days and he is back to "one truck in, one truck out."

The CP reported the weekly average terminal dwell time, excluding cars on run-through trains, was 18.3 mph. CP reported 31,787 cars on the line for the week, which included 16,664 covered hoppers and 9,313 tank cars. The weekly total number of loaded cars in revenue service that have not moved in more than 120 hours was seven for crude oil, zero for ethanol and 85 for grain. The weekly number of empty cars in revenue service that have not moved in more than 120 hours was 14 for crude oil, zero for ethanol and 74 for grain. Outstanding car orders in North Dakota were at 2,529, 304 in Minnesota and 104 in Montana. Here is the link to all the Class 1 railroad filings on Oct. 29:…


Early indications suggest the Canadian federal government may let the rules expire on Nov. 30, which have set the weekly minimum volumes of grain to be hauled by each of the two railways at 536,250 metric tons.

"Federal Agriculture minister Gerry Ritz has reported to Reuters that 'a complete failure by the railways to move grain" would be needed before the minimum volumes would be extended, said DTN Canada Grains Analyst Cliff Jamieson. "The minimum volume targets have stirred significant opposition. Of course the railways have been opposed to the mandates. Joining them has been opposition from U.S. lawmakers, who feel that increased traffic on the Prairies has added to service failures in the U.S. Opposition has also been seen from competing commodities relying on rail service, such as lumber, fertilizer and mining, who feel that the government's actions have 'played favorites,' which is viewed as detrimental to other commodity sectors."

At the same time, some groups feel the government's work is not done. "Short-line railways in western Canada and small shippers continue to be penalized as the railways concentrate their efforts on the most efficient mainline routes in order to meet weekly targets and avoid fines associated with non-performance," said Jamieson. "Many continue to wait for cars which are months over-due. Gordon Harrison, president of the Canadian National Millers Association, told the Western Producer that 'rail service continues to be inadequate, uneven and unpredictable,' highlighting the ongoing concerns faced by domestic processors both in Canada and the U.S. as railways focus on high volume shipments to export terminals, which allow for quick turn-around of empty cars."

Prairie farm groups, producers and shippers will be sorry to see the minimum weekly volumes end for fear of what could follow. Jamieson reported that CN's data for September suggests a weekly average of 5,659 cars were requested for shipment while a weekly average of 5,267 were spotted, which is 26% above the five-year average of 4,181 cars per week. Spotting refers to cars placed at a railroad siding for either loading or unloading.

"Unloads at major export terminals on the west coast, Churchill and Thunder Bay, total 9.228 million metric tons for the week ending Oct. 26 versus last year's volume of 7.1135 mmt and is 37% above the three-year average. While the 2014 crop was significantly lower than the record production seen in 2013, the total production of Canada's principal grains is suggested to be 3% above the five-year average and ample supplies remain to be shipped," Jamieson said.

Mary Kennedy can be reached at

Follow Mary Kennedy on Twitter @MaryCKenn


Posted at 11:48AM CST 11/03/14 by Mary Kennedy

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.


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:…

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:…

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:…


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:…

Mary Kennedy can be reached at

Follow Mary Kennedy on Twitter @MaryCKenn


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?


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 (…), 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:…)

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?


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:…

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."


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.


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:…

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:…

Mary Kennedy can be reached at

Follow Mary Kennedy on Twitter @MaryCKenn


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

Follow Katie Micik on Twitter @KatieMDTN


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
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Recent Blog Posts
  • Early Winter Weather Adds to Rail Problems
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