Market Matters Blog
Katie Micik DTN Markets Editor

Monday 05/04/15

U.S. River Levels Improving

OMAHA (DTN) -- Water levels on the nation's major rivers are slowly beginning to fall, resulting in better conditions for barge traffic, according to reports.

The Myrtle Grove Midstream Terminal Floating Elevator operated by Associated Terminals on the Mississippi transferring corn between barges and ocean vessels bound for foreign markets. (Photo courtesy of Russell Marine Group, New Orleans, Louisiana.)

On Monday, May 3, the Ohio River at Cairo was at 35.3 feet, which is down from the level of 42.4 feet on April 28 (flood stage is 40 feet). It is expected to drop below 32 feet by midweek. The drop in high water has allowed barges to return to normal traffic speeds and has allowed empties to reach grain terminals that had been stalled from loading out grain.

DTN Senior Ag Meteorologist Bryce Anderson said that the trend will be drier for the Ohio Valley during most of the week of May 4-8. "We will see rains of around 1.5 inches return over Mother's Day weekend, but then a drier pattern returns during the week of May 11-15. So, counting the drier trend that we have seen in the southeastern Midwest this week, we'll have a total of around 10 days with little if any rainfall in that part of the country," Anderson said.

Tom Russell, of Russell Marine Group, told DTN via email that the lower Mississippi River, including Baton Rouge and New Orleans, Louisiana, is still high and falling slowly. "River levels in the harbor are moderately high with a very slow-falling river. Due to high water, safety protocols are in place and water will be high enough to remain in place for the balance of May. Barge and ocean vessels operations have some minor delays due high water but moving OK."

As of 8 a.m. Central Daylight Time on May 4, the Mississippi River at Baton Rouge was still sitting slightly above flood stage at 35.26 feet and is expected to hover there for the next week. Severe weather, including heavy rainfall, which moved through south Louisiana on April 27-28, caused Governor Bobby Jindal to declare a state of emergency because of the heavy damage and flooding caused by the storms. On May 4, the National Weather Service at New Orleans/Baton Rouge, Louisiana, continued a flood warning for the Mississippi River at Baton Rouge until Thursday morning. "Minor flooding is occurring and minor flooding is forecast," the NWS noted.

The forecast for the river is that it will remain near 35.2 feet through Tuesday, May 5, and then begin slowly falling. Forecasts are based on rainfall that has occurred, along with anticipated rain for the next 12 hours. Adjustments to river forecasts will be made if additional heavy rainfall occurs. Here is the real-time link to the river level at Baton Rouge and other info: http://goo.gl/…

The Waterways Action Plan for the Baton Rouge Annex states: "During a waterways crisis, a wide range of controls and actions are initiated from various involved parties, including industry and federal government agencies. In general, the industry will take action to reduce potential marine casualties during low- and high-water situations. During high-water conditions (25 feet and above Baton Rouge gauge), the industry may reduce tow sizes to allow more control over the tow and to more effectively utilize towboat horsepower. The Coast Guard and Army Corps of Engineers are also required to take specific and timely actions to aid in preventing marine casualties while facilitating commerce. Dredging operations by the USACE is a typical mission to reduce the risk in hazardous locations on the river."

The forecast for the upcoming week could bring more rain. Anderson said, "The Delta has similar forecast details as the Eastern Corn Belt -- dry through the weekend of May 2-3 and most of the following week, with rain of that 1.5-inch type developing Friday, May 8, through Mother's Day weekend. The Delta pattern differs from the Eastern Corn Belt in that this week will have more consistent showers, with another inch approximately by the end of the week."

Both the soybean and corn river basis were stronger the week ending May 1 along the Ohio River down to the Gulf. Better river conditions and higher export sales were reported for both old-crop corn and soybeans and were supportive to the basis levels. Barge freight rates also added to the basis strength as barge freight on the Lower Ohio River was down 40% from the prior week ending April 24. Barge freight at St. Louis was down 10% and the Cairo to Memphis corridor was down 30%.

Russell said, "The Deep South recorded one of the wettest-ever Aprils. Grain loading operations were greatly impacted and backed up, but most terminals are now getting in front of schedules."

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

Follow Mary Kennedy on Twitter @MaryCKenn

(BAS/AG)

Posted at 11:59AM CDT 05/04/15 by Mary Kennedy
 

Wednesday 04/29/15

New Daily Price Limits Effective May 1

Hey -- guess what? May Day is almost here. It's this Friday, to be specific. When I was a little girl, I used to make baskets out of construction paper, fill them with popcorn and leftover Easter candy, leave them on my neighbor's front steps and play ding-dong ditch. I can't help but laugh at myself two decades later. The fact my mother let me do it in the first place still perplexes me, except I now understand that most of my neighbors weren't home to be disturbed by the doorbell.

There's something else to remember this May Day: CME's new daily price limits. Last year, CME introduced a formula for establishing new limits (more on the math below) that would reset on May 1 and November 1 each year. This time, only the limits for corn, Chicago wheat, soybean oil, oats and rough rice changed.

(All price limits are per bushel unless otherwise noted.)

Commodity Current Price Limit New Price Limit New Expanded Limit
Corn $0.25 $0.30 $0.45
Soybeans $0.70 $0.70 $1.05
CBOT Wheat $0.35 $0.40 $0.60
KC Wheat $0.40 $0.40 $0.60
Soybean Oil $0.025/pound $0.02/pound $0.03/pound
Soybean Meal $25/ton $25/ton $40/ton
Oats $0.25 $0.20 $0.30
Rough Rice $0.90/cwt $0.75/cwt $1.15/cwt

Under CME's new variable price limit formulation, the daily limit is set at 7% of the average settlement price of 45 consecutive trading days. The May readjustment will be based on the July contract's settlement prices while the November adjustment will use the December contract for most grains, and the November contract for soybeans and rice.

CME has previously told me that historically, 99% of the price changes in the grain market have been 7% or less. With the variable limit format, CME expects maybe one or two days with limit moves each year.

CME also established minimum daily price limits -- 20 cents on corn, 50 cents on soybeans and 30 cents on the wheats -- in case the 7% formula is overly restrictive. The higher of the two calculations will be used as the price limit.

The variable price limit mechanism allows for expanded daily limits. If the contract settles up or down the limit, the next day's limit will be expanded 50% and rounded up to the next 5-cent mark. For example, if corn futures settle up 30 cents per bushel (in two contract expirations or in the last contract of the crop year), the limit will expand to 45 cents per bushel the next day and remain at that level until no corn futures contract expirations settle at the expanded 45 cents limit.

If the criteria is met in one of the contracts of the soybean complex (beans, meal or oil), the limits will expand for the whole complex.

(AG\SK)

Posted at 3:00PM CDT 04/29/15 by Katie Micik
 

Monday 04/27/15

Better Weather, Lower Grain and Oil Prices, More Power Help Railroads Improve Service

OMAHA (DTN) -- A combination of milder weather, lower prices for grain and oil and more locomotives has helped railroads improve placement of railcars this spring, according to the latest railroad company reports.

BNSF locomotives moving along the Northern Corridor. (DTN file photo by Mary Kennedy)

One year ago, BNSF owed South Dakota 671 cars, Minnesota 1,496, North Dakota 7,175 and Montana was owed 3,217 cars. System wide, 14,618 cars were owed, according to a BNSF report to the Surface Transportation Board. In their report to the STB on April 22, BNSF reported South Dakota was owed three cars, Minnesota eight, North Dakota 203 and Montana was owed 169. System-wide, the total amount of cars owed stood at 554, a stark contrast compared to one year ago. Part of the decrease in cars owed can be attributed to BNSF adding more locomotives into service.

According to the CP report to the STB on April 22, "Our outstanding grain car orders remain at zero this reporting week, as they have for the previous nine weeks. We spotted a total of 1,432 grain cars this week, which total includes single cars and cars in dedicated trains, and we received 293 new grain car orders. From a grain order perspective, we continue to be current in the United States. With respect to the Rapid City, Pierre & Eastern Railroad (RCP&E), RCP&E did not request any grain cars this week. On average, there was a plus-12 locomotive balance again this reporting week, meaning there were 12 more CP locomotives on RCP&E than RCP&E locomotives on CP."

Besides a milder winter overall compared to last winter and railroads adding more power, grain prices are lower than one year ago, which is causing farmers to sell less product. One year ago, cash corn was priced at $4.77, cash soybeans were $14.58, cash spring wheat was $7.08 and cash winter wheat was $7.38. In comparison, the cash price on Friday, April 24, was $3.47 for corn, $9.29 for soybeans, $5.29 for spring wheat and $4.66 for winter wheat.

Another factor is the decrease in oil prices, which has slowed tank car movements that were clogging railways last year, leaving little room for grain cars. One year ago, June oil futures were trading at $100.84 per barrel and on April 24, June was trading at $57.15 per barrel. In the week ended April 24, Baker Hughes North American Rotary Rig Count reported that the number of rigs drilling for oil in the United States totaled 703, compared with 1,534 a year ago.

The USDA Grain Transportation update reported, "There is a continued shift in grain transportation away from rail towards other modes. Shorter-distance domestic movements to processing facilities within states are more likely to favor truck transportation, whereas long-distance exports movements tend to favor rail or barge. In addition, some traffic shifted to barge, which has 5% more grain traffic year to date, compared to the three-year average." For a more in depth comparison year over year, here is the link to the USDA GTR report on April 23: http://goo.gl/…

BNSF UPDATE ON CAPITAL MAINTENANCE

In January, BNSF announced major capital projects it plans to complete in 2015 to maintain and grow its rail network. The company said it will spend more than $100 million per state in nearly half its network to increase velocity, add capacity and improve their network. Here is the link to the full plan: http://goo.gl/…

On April 24, the BNSF reported, "Our capital maintenance activity is now in full production with work continuing on new double-track projects along our Southern Transcon route. The Panhandle subdivision, which runs from Amarillo, Texas, eastward through Oklahoma and into southern Kansas, will collectively receive approximately 18 miles of new double-track, nearly half of which is already in service. In addition, we will add approximately nine miles of new double-track along our Clovis subdivision in New Mexico, which is expected to finish in June and eliminate a significant bottleneck on the Southern Transcon. As this expansion work is being done, some trains may experience minor delays through the area."

Last November, the BNSF completed an additional eight miles of double-track on their Glasgow subdivision, which runs from Minot, North Dakota, to eastern Montana. Maintenance work in the Dilworth, Minnesota, area was nearly completed and work along the Minneapolis/St. Paul to Chicago main line was scheduled to finish in early December. All of these improvements made by the BNSF created more track space in key areas and allowed for a smoother flow of trains throughout their entire system.

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

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/CZ)

Posted at 11:01AM CDT 04/27/15 by Mary Kennedy
 

Monday 04/20/15

Grain Shipping Season Begins in Duluth-Superior

OMAHA (DTN) -- As of mid-April, high water conditions on the Ohio River and Lower Mississippi River (LMR) continue to affect navigation conditions, reducing tow sizes and delaying transit times.

The KOM is the first saltie to reach the Twin Ports of Duluth/Superior and with her arrival, the 2015 grain shipping began.

Thomas Russell from Russell Marine Group, a New Orleans-based freight logistics company, told DTN via email, "Another round of rolling thunderstorms in the Ohio River Valley has caused the river to remain in high-water situation with some localized flooding. Conditions are improving and the Ohio River is on slow fall. Barge traffic is moving but slow in areas due to high water."

Russell told DTN that in the LMR, from Cairo to Memphis, water levels are high but "not flooding as water off the Ohio River flushes through the system. Some safety areas are set up, but barge traffic is moving."

Russell said that the weather in New Orleans and the Deep South in general has been wet. "Grain terminals have lost eight to nine days due to weather causing back up at most terminals," he said.

The real problem is in the Port Harbor-Baton Rouge to New Orleans. Russell told DTN that the water in the port, like the entire LMR, remains at high levels as water off the Ohio River pushes through. "Safety zones are set up, which has slowed the shifting of barges and barge fleet activities. Some loading terminals are restricted to daylight-only docking and undocking operations until water levels drop below 12 feet in the harbor," Russell said.

A number of ships have recently gone aground at the Southwest Pass (SWP), likely caused by the high water carrying a lot of sand and silt and apparently has caused river bottom shoaling. Russell said that this is the only pass that pilots can bring ocean vessels in and out of the river. The SWP is a 20-mile-long pass that connects the Mississippi River with the Gulf of Mexico. "The SWP is the river delta where sand and silt carried into the river tends to deposit," Russell said. "Dredges have been working on any trouble areas that pop up."

Russell said, "Accumulation of sand/silt tends to build shoals on the river bottom in unexpected locations in the Pass. SWP is not deep enough like other parts of the Nola-Baton Rouge Harbors to absorb with extra sand/silt build up. As the river rises, the bottom follows and the result can be vessel groundings."

Southwest Pass must be dredged on an ongoing basis in order to maintain a deep draft of 47 feet for the bigger ocean vessels. "Most of the ocean vessels carrying grain to the biggest grain market, Asia, need deep drafts," added Russell.

After another vessel went aground in the SWP early last week, the pilots felt there was enough uncertainty about shoals building up and temporarily reduced the deep draft from 47 to 40 feet midweek until new soundings could map the depth of the river bottom. Russell said, "Vessels drafting over 40 feet were not allowed to transit the SWP until soundings (the act of measuring depth) were completed, so they can pinpoint areas of concern for the Corps to concentrate on dredging."

On April 20, Russell said that the soundings had been completed, and due to excess shoaling in an area near the head of SWP, the pilots have imposed a maximum draft of 42 feet for all vessels until dredges can clear the area. Any ship over 35-foot draft can only transit one way during this time.

KOM OFFICIALLY OPENS 2015 GRAIN SHIPPING SEASON IN TWIN PORTS

On Monday, April 14, the Port of Duluth-Superior welcomed Kom, the first "saltie" to have made full transit of the 2,342-mile Great Lakes-St. Lawrence Seaway. According to the Duluth Seaway Port Authority, "Kom is a 465-foot bulk carrier that flies the flag of Malta and was built in 1997. It began its current voyage in A Coruna, Spain. The Kom will load 12,100 metric tons of durum wheat and then depart for Italy, where the wheat will be milled into flour for pasta-making," the Port Authority reported.

The latest arrival on record of the port's first saltie was just last year, as the Diana arrived on May 7, 2014, due to harsh ice conditions that covered the entire Great Lakes. Ironically, the earliest on record happened just one year earlier when the Federal Hunter sailed into port on March 30, 2013.

"The arrival of the first saltie each year is a tangible reminder for residents and tourists alike that the Port of Duluth-Superior is an international seaport," said Vanta Coda, Port Authority executive director. "Situated over 2,300 miles inland, it anchors the westernmost edge of this nation's fourth seacoast -- the Great Lakes St. Lawrence Seaway -- which links the heartland of North America to markets in Europe, the Mediterranean and North Africa. This bi-national waterway enables farmers from the Upper Midwest -- as well as shippers of project cargo, iron ore and coal -- to compete in the global marketplace."

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

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/BAS)

Posted at 11:38AM CDT 04/20/15 by Mary Kennedy
 

Monday 04/13/15

Port of Portland Loses More Business

OMAHA (DTN) -- After nine months of stalled labor negotiations and the loss of a major customer, the Port of Portland had another setback, losing a second customer at its container-handling Marine Terminal 6 (T-6). The terminal has been operated by International Container Terminal Service, Inc. (ICTSI) since 2011 after signing a 25-year lease with the Port of Portland for operation of the container/break bulk facility at Terminal 6, according to the company's website.

Terminal 6 at the Port of Portland, Sept. 2, 2014. (Photo courtesy of KOIN 6 News)

On Feb. 10, Hanjin Shipping Co., which accounted for 78% of the business at T-6, officially withdrew from the Port of Portland, saying its last day would be March 4. In a Feb. 11 article, the Associated Press (AP) reported that Hanjin's pullout wasn't a surprise. In recent years, the company has been unhappy about the pace of work among longshore workers. "If you are in Portland, you should know why. Can't afford the expense of operating there. Simple," Mike Radak, senior vice president for Hanjin USA, told AP.

The Hapag-Lloyd website said "In an effort to improve the schedule integrity of our Mediterranean Pacific Service (MPS), Hapag-Lloyd took the decision for a permanent omission of the port of Portland, Oregon, effective at the end of March 2015." With the departure of Hapag-Lloyd and Hanjin Shipping Co., the only remaining shipping line is Westwood Shipping Lines, a smaller shipping company, which specializes in forest products, and containerized and oversized cargo.

ICTSI Oregon, Inc. released a statement on its website saying, "ICTSI Oregon, Inc. is very disappointed to hear the news of Hapag-Lloyd's decision to cease its direct MPS service calling Portland. Hapag-Lloyd has been very supportive and loyal to the Portland market. Coupled with Hanjin's recent announcement to leave Portland and discontinue its Asia service, Hapag-Lloyd's departure will adversely affect regional businesses that rely on Terminal 6." Here is the link to the full press release: http://goo.gl/…

The news is not good for shippers who relied on the Port of Portland to ship, among other things, agriculture products. SL Follen Company, which exports hay and feed products from the U.S. to Asia and the Middle East, told KOIN News of Portland that costs will rise for their business. "We decided to go temporarily through Texas at an even higher cost to us," Vince Follen told KOIN 6. "We were probably going to have to go to Tacoma and then truck it down, which meant at least another thousand dollars in through-put costs just to get the cargo back to Oregon."

Mike Hajny, vice president of Wesco International, Inc., a hay exporter in Ellensburg, Washington, told DTN in an email that Portland cargo has been an absolute nightmare as of late. "We have a plant south of Salem that is owned by another gentleman, but we market all of his product. Since Hanjin has pulled out, all of the Portland cargo has to be railed or trucked to Seattle/Tacoma. As you can imagine, the rail is over capacity, and trucking from Salem to Tacoma on a daily basis is a logistical headache with the current port situation. The Port of Portland has always been a problem child, but it is going to cause some major changes in pricing structure and product shipment in our business model."

According to AP, the ICTSI is trying to attract new lines to the container terminal. That may be a tough sell due to the labor problems between ICTSI and dockworkers. The other issue is the location of T-6. Because it is inland along the Columbia River, it is less convenient than other West Coast ports.

ILWU SENDS LABOR CONTRACT TO MEMBERS FOR VOTE

On Friday, April 3, ILWU Coast Longshore Caucus delegates voted to recommend approval of the tentative agreement reached on Feb. 20, 2015, between the union and employers represented by the Pacific Maritime Association (PMA), according to a press release on ILWU's website. The proposed five-year contract covers 20,000 dockworkers at 29 West Coast ports.

All 90 delegates spent the week prior to April 3 reviewing the proposed agreement "line-by-line" before voting by 78% to recommend the proposal.

"This agreement required 10 months of negotiations -- the longest in recent history," said ILWU International President Bob McEllrath, "but we secured a tentative agreement to maintain good jobs for dockworkers, families and communities from San Diego to Bellingham. Longshore men and women on the docks will now have the final and most important say in the process."

The next step will be mailing the proposal to affected longshore union members who will then discuss it at local union meetings. A secret ballot membership ratification vote will be the final step in the process, and the final tally will be conducted on May 22.

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

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/BAS)

Posted at 10:57AM CDT 04/13/15 by Mary Kennedy
 

Friday 04/10/15

Sorghum S&D Shake-Up

Bell Eagle, Tennessee, used to be in the heart of cotton country. But now Richard Jameson grows corn, soybeans, wheat, cotton and, for the first time since 2004, milo.

"There is a lot, and I mean a lot, of interest in grain sorghum in the mid-south for 2015," Jameson told DTN. "I noticed, and so did other farmers I know, that the USDA enumerators did not ask us in Tennessee if we were going to plant milo this year when they called in early March."

Historically, Tennessee doesn't grow much milo, also called grain sorghum, and that's probably why enumerators didn't ask, he said.

"Using my operation as an example, my acres in milo will be 20% of my total, after not planting any since 2004," Jameson said. "The outside sales rep from the co-op told me this week that he has orders for 6,000 acres of milo in 2015 after only 1,500 last year."

In March's Prospective Planting report, USDA forecast farmers would plant 7.9 million acres to sorghum, up from 7.1 million acres in 2014. On Thursday, USDA made major revisions to sorghum's supply and demand balance sheet, cutting the ending stocks by 33%.

"USDA's April ending stocks estimate of 18 mb was bullish for sorghum and below expectations," said DTN analyst Todd Hultman said. "The risk ahead is that so much of this market depends on China's demand, and will their demand for sorghum hold up after they agreed again to accept U.S. corn?"

China approved the biotech corn trait MIR 162, also known as Agrisure Viptera, for import last December, ending a year-long standoff that caused trade to grind to a halt. So far, current and outstanding export sales to China are a mere fraction -- 179,000 metric tons vs. 2.6 million metric tons -- of what they were before the trade disruption.

Sorghum sales are a different story. More than 5.1 million metric tons of sorghum, about 200 million bushels, have already been shipped to China. Another 1.6 mmt of sales are on the books for this year, as well as about 400,000 metric tons for the next marketing year.

USDA adjusted the supply and demand table to reflect the current pace of export demand, up 50 mb to 350 mb. USDA also lowered feed use and use for ethanol, noting that no sorghum was used for ethanol production in February.

It also made a large adjustment to the residual component of demand.

"U.S. sorghum feed and residual use for 2014-15 is projected at 85 million bushels, despite indicated feed and residual disappearance for the first half of the marketing year (September-February) of 154 million bushels," USDA stated. "Early harvested 2015-crop sorghum, particularly from Texas, is expected to augment 2014-15 marketing year supplies and support exports at 350 million bushels during the 2014-15 marketing year that ends August 31.

"The Prospective Plantings report indicated that Texas producers intend to increase sorghum plantings by 20 percent for 2015. Last year, more than 80 percent of the Texas sorghum crop was mature by mid-August. These additional supplies, exported before the September 1 start of the new marketing year, push feed and residual use during the second half of 2014-15 (March-August) well into negative territory. These supplies will also boost first-quarter (September-November) feed and residual disappearance in the 2015-16 marketing year, as in 2014-15."

Back in Tennessee, Jameson said it's been so rainy and wet that corn planting is delayed -- just 2% compared to the five-year average of 10% planted as of April 6. It's giving Jameson, and his neighboring farmers, extra time to reconsider their crop mix for 2015.

Hultman and DTN Senior Analyst Darin Newsom agree that given the risks (relying almost solely on China's purchases), it's still worth planting milo this year.

Newsom added: "especially if you can lock in a strong new-crop basis early and let the futures market (try to) rally this spring."

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

Follow Katie Micik on Twitter @KatieMDTN

(AG/CZ)

Posted at 4:03PM CDT 04/10/15 by Katie Micik
 

Monday 04/06/15

Will China Import More Corn?

There's no bigger long-term question in the grain markets today: Will China import more corn?

The answer appeared to be a clear 'yes' just a few years ago. After all, China's share of the U.S. export market had surged from 2% in 2010 to 13.5% in 2013. China was on the path to becoming a regular and consistent buyer. But then it began rejecting corn cargo ships for low-level presence of biotech traits that we're yet approved for import, and China's potential as a major market for U.S. corn was once again in question.

Despite the fact that China has since approved MIR 162, the biotech trait at the heart of the issue, corn sales to China amount to barely a trickle. There are lots of reasons as to why, with the three biggest being China's domestic corn policies, the substitution of grain sorghum and U.S. grain traders' reluctance to risk another rejected corn cargo.

A recent article in the magazine Choices, a peer-reviewed publication run by the Agricultural and Applied Economics Association, attempts to answer that question by taking an on-the-ground fundamental look at China's livestock industry, the elusive statistics that just don't add up, demand for different feed grains and changes to China's self-sufficiency policy.

I don't think I've ever read an article that so thoroughly explains the state of China's corn and livestock markets. It's written by Brian Lohmar, who is currently the U.S. Grain Council's China director. He previously served as the director of economic research for Bunge CHINA and as a China specialist for USDA's Economic Research Service. He knows China agriculture as well, or better, than any American I've met.

I highly encourage you to take the time to read the article, but for those of you who are just plain busy this time of year, here's the CliffsNotes version. (Here's a link to the full article: http://bit.ly/…)

-- The growth and modernization of China's livestock industry has changed the grain markets, but there's very poor quantifiable information on meat supply and demand in China.

Lohmar explains that generally, China is the largest producer of pork, eggs, and aquaculture products in the world and the second largest producer of poultry. Yet getting an understanding of the underlying supply and demand is quite difficult. Based on official statistics, China slaughters 715.6 million hogs annually, about 40.7 kilograms per capita. Yet consumption estimates show that Chinese consumers eat 21.2 kg/year at home. Even considering the amount consumed outside of the home, there's a pretty stark discrepancy.

China's Commerce Department even started gathering data on slaughter, and it doesn't add up to the official pork production numbers either, Lohmar said. All of this, especially when combined with the feed conversion ratio, plays an important role in understanding China's feed production estimates and demand for certain feed ingredients.

-- In 2012, total feed use in China was only 267.7 mmt, far below the 350 mmt suggested by commercial feed production estimates. Protein meal inclusion in rations has increased much faster than energy feed inclusion, at about 7% per year over 10 years compared to 3.5%.

"The point of all this is that China's official production and consumption estimates for livestock products are far apart and one must go through substantial gymnastics to arrive at estimates that are reasonable in themselves and reasonably close to each other," Lohmar writes. "Moreover, even an estimate that assumes meat production is much lower than official production estimates is well beyond the individual estimates of feed use for specific ingredients such as corn and soybean meal. For a country that puts such emphasis on not only development of the livestock industry but also on maintaining feed grain production growth to meet domestic demand, it is somewhat surprising that there are no real reliable estimates of livestock production, feed demand or demand for important feed ingredients such as corn. Or at least the estimates that do exist, do not seem to match each other."

He concludes that meat consumption is likely below the official production numbers, meaning there's substantial room for continued growth. Second, as protein meal inclusion rates increase to a level that maximizes efficiency, the growth of energy feed and protein meal will begin to converge. "For energy feed, this means an acceleration of growth vis-à-vis total feed demand growth."

-- China has conflicting goals: maintaining high domestic corn prices and developing a competitive livestock industry, all while attempting to embrace market mechanisms.

China's decision to adopt a 95% self-sufficiency policy for grains in the mid-1990s lead to the boom in soybean imports as farmers focused on growing food grains.

China's domestic corn production grew from about 99 mmt in 1993 to 213 mmt in 2013. Lohmar notes that 70% of the growth was due to expanded acreage, not yield improvements. It's also not clear where the 15 million hectare expansion of acreage came from. With China's fierce competition for land, Lohmar doesn't see acreage increasing, so any future gains in China's crop will have to come from yield. Yield improvements face challenges from China's land tenure system that favors small farms and makes it uneconomical to implement the fertilization programs needed to enhance yields.

"... It seems that corn production growth in China will slow in coming years," Lohmar writes. "Meanwhile, as protein meal inclusion growth begins to slow and converge with overall feed growth, demand for energy feeds will do the opposite. Energy feed growth can be expected to rise to converge to overall feed demand growth, and the additional energy feed will likely come from corn or other feed grains. Together, these two trends will cause corn import demand to grow, especially if demand growth for animal products remains robust."

China's focus on expanded corn production has lead it to pay increasingly higher prices to farmers in the Northeastern provinces for nearly five years in a row. Global prices have declined significantly in the past couple of years, and China reacted by restricting imports of cheaper global corn. This forces livestock feeders to pay higher prices for feed, making them less competitive.

"Whether China decides to import corn to support domestic livestock production rather than import the livestock products directly, will depend in part on how China resolves the current situation of large, expensive stocks and transitions to a policy that allows corn prices to converge closer to import parity," he writes. "However, it will also depend on whether China's producers can improve efficiency and also whether they can reduce some of the environmental impacts of large livestock operations. Livestock producers in China are increasingly efficient, but the industries, in aggregate, are still not as efficient as more developed industries in many of China's trading partners, who also currently have the additional advantage of low corn prices."

Lohmar eventually sees China liberalizing its corn import policies and trying to get its domestic prices to converge with global prices. "As demand for animal products continues to grow, and the industry continues to modernize and adjust to new realities, we will likely see imports of both feed products and animal products rise, with corn being a key component of these trends."

(CZ/SK)

Posted at 12:40PM CDT 04/06/15 by Katie Micik
Comments (1)
How can China just cancel an order then buy more when the price drops?
Posted by FRANK FULWIDER at 12:55PM CDT 04/10/15
 
Truck Driver Shortage

While we have had our attention on ag transportation difficulties at railroads and at ocean ports, several issues also have been developing for over-the-road trucks and drivers.

Trucks in line at a grain elevator. (DTN file photo)

In October of 2014, Bob Costello, chief economist and senior vice president of the American Trucking Associations (ATA) told the attendees at ATA's management conference, "The one dark cloud is a driver shortage that is "as bad as ever and is expected to get worse in the near term."

In an April 1 press release on the ATA's website, Costello said, "Due to growing freight volumes, regulatory pressures and normal attrition, we expect the problem to get worse in the near term as the industry works to find solutions to the shortage."

Costello said one of the reasons for the shortage is demographics; the average age of a truck driver is 49 years old vs. an average of 42 years old for all U.S. workers. Another reason is the gender issue; the average number of women employed in the U.S. is 47% while only 6% of truck drivers are women. He also said getting a commercial drivers license is expensive and not easy, and while trucking companies reimburse the expense, many pay it back in installments. Pay has been an ongoing issue and many trucking companies are now offering driver bonuses to entice workers. "Even with pay increases, we are still having trouble attracting people," said Costello.

A driver shortage makes it "difficult to add capacity" and it "increases operational hardships by costing freight delays," Costello said. Here is a link to his interview posted on the ATA website: http://goo.gl/…

HireRight, a leading provider of online background checks, drug and health screenings, and employment eligibility verifications released their annual 2015 Transportation Spotlight. The report also addresses the problems plaguing the trucking industry. "The ATA estimates that the current driver shortage tops 35,000 driver candidates; and an additional 240,000 new truck drivers will be needed by 2023," noted the report.

"While there are a multitude of reasons, the top three reasons why drivers leave an organization remain fairly consistent from year-to-year; to make more money (49% in 2015 vs. 51% in 2014); to spend more time at home (40% in 2015 vs. 41% in 2014); and to receive better benefits(32% in 2015 vs. 27% in 2014). Almost a quarter (24%) of respondents reported health issues as being a reason for driver turnover. Life on the road is an extremely physically demanding occupation. The average life expectancy of a trucker is less than that of the general public. As the workforce continues to age, regulatory agencies will continue to scrutinize the health of drivers." Here is the link to download the entire report: http://www.hireright.com/…

MORE REGULATIONS ADD TO THE SHORTAGE

On November 28, 2014, the Federal Motor Carrier Safety Administration (FMCSA) announced "it is considering a rulemaking that would increase the minimum levels of financial responsibility for motor carriers, including liability coverage for bodily injury or property damage; establish financial responsibility requirements for passenger carrier brokers; implement financial responsibility requirements for brokers and freight forwarders, and revise existing rules concerning self-insurance and trip insurance. FMCSA asked for public comments on these topics that were due February 26, 2015." Here is a link to the announcement: http://goo.gl/…

The National Grain and Feed Association (NGFA) responded and said it "values FMCSA's efforts to promote safety on the roadways and supports efforts to keep drivers of commercial motor vehicles operating safely." However, it said, "While safe operation of commercial motor vehicles is in everyone's best interest for myriad reasons, the FMCSA proposal to increase the minimum levels of financial responsibility for motor carriers raises questions as to how this proposal would achieve that objective."

NGFA urged the FMCSA to forgo issuing such a proposed rule, or "at the very least, evaluate the impacts of additional premium costs on commercial freight transportation" before doing so.

Others support the proposed rule; Joan Claybrook, chair of Citizens for Reliable and Safe Highways, posted this comment on the FMCSA website: "Congress recognized in the Motor Carrier Act of 1980 that minimum insurance requirements encourage safe operations by carriers but the incentive provided by this mandate is seriously diluted if the requirements are grossly outdated. With updated substantial minimum insurance requirements that reflect the current realities of the industry, risky carriers will seek to avoid serious crashes instead of simply treating such tragic events as nothing more than the cost of doing business. As such, I support raising the minimum levels of financial responsibility for motor carriers." Here is link to view the 2,179 comments received by the FMCSA: http://goo.gl/…

Another pending FMCSA mandate is the rule mandating the use of electronic logging devices. According to the FMCSA, "The proposed rule will ultimately reduce hours-of-service violations by making it more difficult for drivers to misrepresent their time on logbooks and avoid detection by FMCSA and law enforcement personnel. Analysis shows it will also help reduce crashes by fatigued drivers and prevent approximately 20 fatalities and 434 injuries each year for an annual safety benefit of $394.8 million."

"ATA supports FMCSA's efforts to mandate these devices in commercial vehicles as a way to improve safety and compliance in the trucking industry and to level the playing field with thousands for fleets that have already voluntarily moved to this technology," said ATA President and CEO Bill Graves.

However, many owner-operators aren't in agreement and say they are concerned over costs, privacy and how the data will be stored. The proposal by the FMCSA is expected to cost the industry $1.6 billion, which could cause an increase in rates and become a financial burden for smaller motor carriers.

The final ruling for implementation of electronic devices is expected to be issued by the end of 2015 and implemented by 2017.

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

Follower her on Twitter @MaryCKenn

(CZ/BAS)

Posted at 10:58AM CDT 04/06/15 by Mary Kennedy
 

Friday 04/03/15

U.S. Dollar Takes a Break

What a difference a month can make. On Mar. 10, I wrote about a U.S. dollar index that was spiraling higher, fed by news of a growing U.S. economy that was anticipating its first hike in interest rates since 2006.* At the same time, Europe's economies struggled with low growth, Greece's debt problems, and pockets of high unemployment.

The U.S. dollar index is still above its 50-day average, but the bullish narrative has changed this week and the buying frenzy has ended... at least for now. (DTN chart)

Money chases opportunity and the obvious contrast sent the dollar index to a high of 100.33 on Mar. 13, a 26% gain in just under nine months. For U.S. grain prices, the dollar's rise was bearish news, especially in the month of March when little else was happening to entertain traders.

Just this week, we have finally seen a change in the dollar's bullish narrative, the first fundamental challenge to higher prices since last summer. The European Central Bank began its program of quantitative easing less than a month ago, but some encouraging signs have already emerged.

On Mar. 31, Eurostat reported that the unemployment rate for the Euro area improved from 11.4% to 11.3% in February.** It is a small change, but in the right direction, and was also the lowest rate since May of 2012. In Germany, where fourth quarter GDP growth was the sixth best of 28 European nations, the number of unemployed dropped to 2.932 million in March, the lowest total since the two Germanys reunited 24 years ago.***

At the same time Europe is showing glimmers of improvement, the outlook for the U.S. economy is softening. Concerns about first-quarter growth found ammunition on Apr. 1 when the Institute of Supply Management's index of U.S. manufacturing dropped from 52.9 to 51.5 in March, the same day that a different manufacturing index for the Eurozone hit its highest level in ten months.

Adding to the bearish arguments, the Atlanta Federal Reserve said Thursday that it expects no GDP growth for the U.S. in the first quarter of 2015, down from its earlier estimate of 1.9% annualized growth in early February.**** It blamed the slowdown on winter weather and a more expensive U.S. dollar.

As I write this on Friday morning, the U.S. dollar index is down .84 after the U.S. Labor Department said that the U.S. unemployment rate stayed at 5.5% in March. Non-farm payrolls, however, only increased by 126,000 in March, much less than expected reported RTTNews.com -- a statistic that reinforces concerns over the economy's latest hiccup.

The overall fundamental outlook still favors a higher U.S. dollar as it remains likely that the U.S. economy will increase interest rates ahead of Europe. However, this week's change in the narrative has deflated the buying frenzy that we witnessed in early March and is giving grain prices bullish relief. For grains, the dollar's bearish influence is fading and the focus is coming back to weather, where the increased attention is well-deserved.

*"Seven Months and Counting" posted Mar. 10, 2015 on DTN.

** Eurostat news release, Mar. 31, 2015, "Euro area unemployment rate at 11.3%" at:

http://ec.europa.eu/…

*** "German unemployment slides below 3 million" posted Mar. 31, 2015 by Deutsche Welle at:

http://www.dw.de/…

**** "Atlanta Fed cuts growth forecast to zero" by Heather Long, Apr. 2, 2015 at:

http://money.cnn.com/…

Todd Hultman can be reached at todd.hultman@dtn.com

Follow Todd Hultman on Twitter @ToddHultman1

(KM)

Posted at 11:07AM CDT 04/03/15 by Todd Hultman
 

Monday 03/30/15

Lock and Dam 2 Welcomes First Barge

OMAHA (DTN) -- Spring shipping season is near. The Upper Mississippi River opened after a vessel moved barges through Lock and Dam 2 as the lead-off act. But three of the Great Lakes remain more than 50% ice covered.

The motor vessel New Dawn is shown as it moved through Lock and Dam 2, near Hastings, Minnesota, after breaking through Lake Pepin ice on March 25. (Photo courtesy USACE St. Paul District)

On the first day of spring 2015, 12 to 13 miles of Lake Pepin were covered in ice with the thickest spot 19 inches. Lake Pepin is located 60 miles downriver from St. Paul, Minnesota.

According to the Minnesota Department of Natural Resources, Lake Pepin is the largest lake on the Mississippi River. It is basically the only "highway" to get to the St. Paul Mississippi River District, which is home to many grain terminals that ship barges of corn, soybeans and feed grains downriver.

On March 24, the U.S. Army Corp of Engineers (USACE) St. Paul District said, "The ice on Lake Pepin is thinning and the amount of coverage has decreased to just five miles. The thickest ice was measured at 12 inches at mile 772. Mother Nature's getting closer to freeing up the river for commercial tows and rec boaters."

Tows will typically move barges through ice no thicker than 10 to 12 inches so they don't risk damage to their vessels.

At the crack of dawn on March 25, the appropriately named motor vessel New Dawn moved through Lock and Dam 2, near Hastings, Minnesota. "She was pushing nine loaded fertilizer barges en route to St. Paul, Minnesota," said the USACE.

Once the barges unload, they will likely move up to St. Paul and load grain to move south. The first tow to arrive at Lock and Dam 2 becomes the unofficial "opening act" of the spring navigation season. That means all the Mississippi River locks are accessible to commercial and recreational vessels. The earliest date for an up-bound tow to reach Lock and Dam 2 since 2000 was on March 4 and the latest arrival since 1970 came last year on April 16.

GREAT LAKES PARTIALLY OPEN FOR BUSINESS

While the ice on the Great Lakes is nowhere as severe as it was this time last year, over 50% ice remains on three of the lakes. As of March 29, Lake Superior was 71.4% ice covered vs. 90.9% one year ago; Lake Erie was 69.7% covered vs. 74.3% last year; and Lake Huron was 56% covered vs. 85.1% one year ago. Lake Michigan was 23% ice covered vs. 42.5% and Lake Ontario was the only one currently above last year's figure at 21% vs. 12% one year ago. Here is a link to the most current ice coverage on the Great Lakes: http://www.glerl.noaa.gov/…

The official start to the Great Lakes commercial season began on March 23 on Lake Superior when the John G. Munson loaded iron ore pellets and headed out of the Twin Ports after a winter layup one week later than the usual first departure. At the head of Lake Superior however, Thunder Bay, Ontario, shipping has yet to start and the April 2 scheduled date may now be pushed back to April 5, depending on ice conditions.

At 12:01 a.m., Wednesday March 25, the USACE officially opened the Soo Locks. The locks at Sault Ste. Marie, Michigan, are among 16 locks that form the Great Lakes-St. Lawrence Seaway navigation system, which extends from Duluth, Minnesota, to the Atlantic Ocean via the St. Lawrence Seaway, according to the USACE. However, as ships moved through the locks, the ice conditions became too difficult for them to continue. On March 29, the Great Lakes Shipping News reported, the "Edwin H. Gott and Roger Blough continue to struggle with ice west of Whitefish Point. USCG Mackinaw and Alder have returned to Sault Ste. Marie, possibly for fuel or repairs. Algoma Olympic remains tied on the lower Poe Lock pier until permission is given for her to enter the ice fields above the locks."

Tim Heney, CEO of the Thunder Bay Port Authority told the Great Lakes Shipping News, "While the ice isn't as bad as last year, it is still challenging. As the largest grain export port on the Lakes, the Soo Locks are essential to Thunder Bay since 100% of their trade moves through the locks down to the Welland Canal and out through the Seaway. The majority of our grain leaves the Port on Lakers for transloading onto ocean vessels in Quebec destined for customers in Europe, the Middle East, Africa, and Latin America. We also load ocean vessels for direct export."

In the meantime, the opening of the St. Lawrence Seaway has been delayed to April 2 due to heavy ice in sections of the passage. The St. Lawrence Seaway is the waterway from Montreal to mid-Lake Erie and normally opens around March 25. The Great Lakes Shipping News reported that St. Lawrence Seaway Management Corp. said it made the decision to delay the opening after considering "conditions affecting safe navigation and effective system transit."

Once the Seaway opens, ocean-going vessels or saltwater vessels (salties) make their way to Great Lakes destinations. Officials expect ships will still have a slow trip depending on ice conditions. Ship owners have said some vessels will need an ice breaker as an escort, especially on Lake Erie and Lake Superior. Many of the ice breakers that helped the Great Lakes last year may be unavailable for help because of the harsh ice conditions on the East Coast.

The first saltie to open the grain shipping season is not expected in the Twin Ports of Duluth/Superior until mid-April. Adele Yorde, PR manager for the Duluth Seaway Port Authority told DTN in an email, "Considering the ice and the late opening of the (St. Lawrence) Seaway this year not sure we'll see one arriving at this end of the system until at least April 10-12."

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

Follow Mary on Twitter @MaryCKenn

(CZ/BAS)

Posted at 11:15AM CDT 03/30/15 by Mary Kennedy
 
Lock and Dam 2 Welcomes First Barge

OMAHA (DTN) -- Spring shipping season is near. The Upper Mississippi River opened after a vessel moved barges through Lock and Dam 2 as the lead-off act. But three of the Great Lakes remain more than 50% ice covered.

The motor vessel New Dawn is shown as it moved through Lock and Dam 2, near Hastings, Minnesota, after breaking through Lake Pepin ice on March 25. (Photo courtesy USACE St. Paul District)

On the first day of spring 2015, 12 to 13 miles of Lake Pepin were covered in ice with the thickest spot 19 inches. Lake Pepin is located 60 miles downriver from St. Paul, Minnesota.

According to the Minnesota Department of Natural Resources, Lake Pepin is the largest lake on the Mississippi River. It is basically the only "highway" to get to the St. Paul Mississippi River District, which is home to many grain terminals that ship barges of corn, soybeans and feed grains downriver.

On March 24, the U.S. Army Corp of Engineers (USACE) St. Paul District said, "The ice on Lake Pepin is thinning and the amount of coverage has decreased to just five miles. The thickest ice was measured at 12 inches at mile 772. Mother Nature's getting closer to freeing up the river for commercial tows and rec boaters."

Tows will typically move barges through ice no thicker than 10 to 12 inches so they don't risk damage to their vessels.

At the crack of dawn on March 25, the appropriately named motor vessel New Dawn moved through Lock and Dam 2, near Hastings, Minnesota. "She was pushing nine loaded fertilizer barges en route to St. Paul, Minnesota," said the USACE.

Once the barges unload, they will likely move up to St. Paul and load grain to move south. The first tow to arrive at Lock and Dam 2 becomes the unofficial "opening act" of the spring navigation season. That means all the Mississippi River locks are accessible to commercial and recreational vessels. The earliest date for an up-bound tow to reach Lock and Dam 2 since 2000 was on March 4 and the latest arrival since 1970 came last year on April 16.

GREAT LAKES PARTIALLY OPEN FOR BUSINESS

While the ice on the Great Lakes is nowhere as severe as it was this time last year, over 50% ice remains on three of the lakes. As of March 29, Lake Superior was 71.4% ice covered vs. 90.9% one year ago; Lake Erie was 69.7% covered vs. 74.3% last year; and Lake Huron was 56% covered vs. 85.1% one year ago. Lake Michigan was 23% ice covered vs. 42.5% and Lake Ontario was the only one currently above last year's figure at 21% vs. 12% one year ago. Here is a link to the most current ice coverage on the Great Lakes: http://www.glerl.noaa.gov/…

The official start to the Great Lakes commercial season began on March 23 on Lake Superior when the John G. Munson loaded iron ore pellets and headed out of the Twin Ports after a winter layup one week later than the usual first departure. At the head of Lake Superior however, Thunder Bay, Ontario, shipping has yet to start and the April 2 scheduled date may now be pushed back to April 5, depending on ice conditions.

At 12:01 a.m., Wednesday March 25, the USACE officially opened the Soo Locks. The locks at Sault Ste. Marie, Michigan, are among 16 locks that form the Great Lakes-St. Lawrence Seaway navigation system, which extends from Duluth, Minnesota, to the Atlantic Ocean via the St. Lawrence Seaway, according to the USACE. However, as ships moved through the locks, the ice conditions became too difficult for them to continue. On March 29, the Great Lakes Shipping News reported, the "Edwin H. Gott and Roger Blough continue to struggle with ice west of Whitefish Point. USCG Mackinaw and Alder have returned to Sault Ste. Marie, possibly for fuel or repairs. Algoma Olympic remains tied on the lower Poe Lock pier until permission is given for her to enter the ice fields above the locks."

Tim Heney, CEO of the Thunder Bay Port Authority told the Great Lakes Shipping News, "While the ice isn't as bad as last year, it is still challenging. As the largest grain export port on the Lakes, the Soo Locks are essential to Thunder Bay since 100% of their trade moves through the locks down to the Welland Canal and out through the Seaway. The majority of our grain leaves the Port on Lakers for transloading onto ocean vessels in Quebec destined for customers in Europe, the Middle East, Africa, and Latin America. We also load ocean vessels for direct export."

In the meantime, the opening of the St. Lawrence Seaway has been delayed to April 2 due to heavy ice in sections of the passage. The St. Lawrence Seaway is the waterway from Montreal to mid-Lake Erie and normally opens around March 25. The Great Lakes Shipping News reported that St. Lawrence Seaway Management Corp. said it made the decision to delay the opening after considering "conditions affecting safe navigation and effective system transit."

Once the Seaway opens, ocean-going vessels or saltwater vessels (salties) make their way to Great Lakes destinations. Officials expect ships will still have a slow trip depending on ice conditions. Ship owners have said some vessels will need an ice breaker as an escort, especially on Lake Erie and Lake Superior. Many of the ice breakers that helped the Great Lakes last year may be unavailable for help because of the harsh ice conditions on the East Coast.

The first saltie to open the grain shipping season is not expected in the Twin Ports of Duluth/Superior until mid-April. Adele Yorde, PR manager for the Duluth Seaway Port Authority told DTN in an email, "Considering the ice and the late opening of the (St. Lawrence) Seaway this year not sure we'll see one arriving at this end of the system until at least April 10-12."

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

Follow Mary on Twitter @MaryCKenn

(CZ/BAS)

Posted at 11:14AM CDT 03/30/15 by Mary Kennedy
 

Monday 03/23/15

West Coast Port Tension Still Simmering

OMAHA (DTN) -- It's been one month since the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) tentatively agreed on a new five-year contract, covering workers at all 29 West Coast ports. The next step will be taken sometime during the week of March 30 when a caucus of 90 union delegates will decide to recommend it for consideration by the full membership. Then, every union member will receive a copy of the tentative agreement for discussion at their local union meeting. After that, a vote to ratify (or not) is then taken by secret ballot sometime during April.

Containers loaded on rail cars heading for export. (DTN photo by Elaine Shein)

There has been talk circulating that the ILWU Local 10 in Oakland is expected to vote against the contract. Evidence of this mounted when, on March 11, the Port of Oakland said on their website, "Oakland International Container Terminal has suspended yard and gate operations for the remainder of the day shift March 11. The terminal said that it has dismissed longshore workers after they refused to work due to a dispute over staffing levels." On March 11, the PMA issued a statement saying that "ILWU Local 10 has repeatedly engaged in illegal work stoppages at the Port of Oakland, bringing operations to a standstill at Oakland International Container Terminal, the largest terminal in the Port." The terminal was reopened for business on March 12. Here is the link to the PMA press release on March 11: http://goo.gl/…

The Port of Oakland also had problems with workers shortly after the tentative contract had been negotiated. On Feb. 22, the port experienced some labor issues with the day shift, resulting in the suspension of those workers. The port's website said while work resumed at the Port of Oakland the evening of Saturday, Feb. 21, it continued Sunday morning, but then was suspended for the remainder of the day shift. The website said that "The issue is a labor-management dispute over break time." The PMA released a statement on Feb. 22 saying they "will continue to address any future work stoppages by Local 10 through the grievance and arbitration process, and, if necessary, in court." Here is a link to the full PMA press release on Feb. 22: http://goo.gl/…

The Port of Portland is not without its problems either. The International Container Terminal Services, Inc. (ICTSI), which operates at Terminal 6 and the ILWU, still have "bad blood" between them, according to a comment made by Port Executive Director Bill Wyatt to the Oregonian in February. And with the departure of Hanjin shipping from the port in March, the port is concerned that the ICTSI could follow, although Wyatt doesn't feel it will come to that and said that ICTSI is working to entice new business to the Port. Still, relations between both parties have been tense for some time and are one of the reasons said to have driven Hanjin out of Portland.

The Oregonian reported on March 10 that "a federal judge ordered the national longshoremen union and its Portland chapter to pay nearly $60,000 to the National Labor Relations Board for violating a court order to resume normal operations at the Port of Portland's Terminal 6." In December 2014, the ILWU was found guilty of work slowdowns at the container terminal that went on for more than a year. In July of 2012, U.S. District Judge Michael Simon extended an order banning slowdowns by ILWU and required longshoremen to comply with his order. At that time, Hanjin was staying away from Portland because of the work disruptions. Finally, in 2015, the company decided enough was enough and on March 9, left Portland for good.

TIME FOR A CHANGE?

There seems to be a consensus forming among shippers that Congress should get involved to ensure that U.S. ports don't go through costly slowdowns every time a labor contract comes up for renewal. Many exporters would like to see Congress remove U.S. ports from under the governing body of the National Labor Relations Act (NRLA). At issue is that the NLRA allows for work and labor slowdowns, which has happened during contract negotiations. Exporters would like to see the U.S. ports have a new "boss": the Railway Labor Act (RLA), which currently governs airlines and railroads. The general purpose of the RLA is "to avoid any interruption to commerce or to the operation of any carrier engaged therein" and to "provide for the prompt and orderly settlement of all disputes concerning rates of pay, rules, or working conditions," among other things. Here is the link to the full text of the RLA: http://railwaylaboract.com/…

Mike Hajny, vice president of Wesco International, Inc. Ellensburg, Washington, told DTN in an email that he agrees that ports should be subject to the Railway Labor Act. He said, "While the ILWU should continue to be free to negotiate whatever labor contract they feel is justified, they should never again be permitted to shut down our ports. They need to be subject to the Railway Labor Act -- and 2015 should be the last time that we ever have to suffer through an ILWU port shut-down again."

Hajny told DTN that Wesco has been exporting hay since 1971, and together with the farmers, vendors, and suppliers they work with, have faced many challenges over the years. "Whether it's untimely rain at harvest time, or drought, or sudden changes in exchange rates or oil prices, we're used to the ups and downs of agriculture in the international marketplace. What we're not used to, however, and what we have no way to prepare for or defend against is the devastating harm caused when the ILWU holds our access to international transportation hostage in their periodic contract negotiations with the PMA."

"In terms of gross sales lost during the 11/1/14-2/23/15 ILWU slowdown, Wesco's sales were down $6,500,000 when compared to the same period the previous year." Hajny said. "But the real, personal toll of the slowdown came in the paychecks of our 65 employees who had their overtime eliminated just as they were going into the Christmas season. Real working people lost wages, real farmers lost the full value of their harvest, and thousands upon thousands of eastern Washington families had to worry about their financial futures, while a couple hundred cynical ILWU members in Seattle and Tacoma played chicken with the PMA over their $140,000-plus salaries, $80,000 pensions, and who was going to pay the payroll taxes on their $35,000-a-year Cadillac medical insurance policies."

Hajny added, "We really, really need the help of our local and federal legislators to protect the economy of eastern Washington and the livelihoods of so many people by making it impossible for the public infrastructure of the ports of Seattle and Tacoma to be hijacked by the narrow, self-serving interests of such a small group of people."

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

Follow Mary Kennedy on Twitter @MaryCKenn

(AG)

Posted at 11:42AM CDT 03/23/15 by Mary Kennedy
 

Thursday 03/19/15

Overheard at NGFA

Planting prospects, corn quality concerns, how to handle the closing of the pit trade – just a few of the conversations I overheard at this year’s National Grain and Feed Association annual convention in San Antonio. At meetings like these, some topics are hot potatoes tossed around everywhere you turn, like transportation and agriculture's revamped relationship with the Commodity Futures Trading Commission. Others are just sparks, things overheard here or there, left to smolder where they were spoken.

My notebook filled up with these little gems.

-- Any large shifts from corn to soybeans seems like they will be regional. In northwest Iowa and parts of Minnesota, one elevator manager said he could see a 3% to 7% shift away from corn this year depending on spring weather, but it will mostly come from ground that’s been in corn-on-corn production for many years. Near Aberdeen, South Dakota, one manager said farmers are asking about a variety of smaller crops like sunflowers and barley. There were some reports of wheat being ripped up in Southern Illinois. Gentlemen from the Texas panhandle said the wheat crop there is in the best shape it’s been in for the last few years, and that farmers are starting to pull their cattle off. Other parts of Texas reported increased competition from milo.

-- Many elevator managers said they see farmers mostly sticking to their rotations unless spring weather dictates they do something else, but they also added that agronomy sales are lagging their usual pace. Sales of P and K (phosphorous and potassium) are lagging in many parts of Corn Belt, and farmers seem content to let the fertility they’ve built up in the soil during the boom years carry them through this season. They also noted farmers are purchasing more non-GMO corn seed and seed varieties with one or two fewer stacked traits to try and save on input costs. Elevators expressed concern that this could lead to lower yields.

-- Corn quality varies by region. In Nebraska, South Dakota and parts of the Northern Plains, harvest was dry and swift. Corn in those areas is coming out of the bin a little dry, but in areas like Ohio and Michigan the story couldn’t be more different. Much of the corn was put up wet, and dryers are still running. And in Missouri, the manager of one elevator said they’ve started to notice an odor on corn from storage bags. He thinks farmers have about 15 days to empty them before quality becomes a problem.

-- Farmers are still holding a lot of grain on the farm, and many of the country elevator committee board members said they think it could be as high as 50%. Many are preparing for a “second harvest,” when a new flood of grain comes to the market. In the meantime, they’re busy picking up and shipping the corn stored in ground piles before it gets too hot.

-- CME Group is sorting through the details of how to transition to an electronic-only market. NGFA’s risk management committee seemed to have two large concerns: how CME would handle certain types of market orders than can only be executed by brokers on the floor, and how they’d structure the short post-close session that allows traders to even up their books. Market-on-close orders seemed to get the most discussion. Usually a broker makes these trades as close to the close as possible, and currently, there’s no way to do it electronically. CME suggested the trade-at-settlement order type, which is commonly used in the energy markets, might be a solution. The committee responded cautiously and said CME has a lot of education to do because there are subtle differences between the order types. CME is also seeking input on how long its post-close trading session should be and what kinds of parameters it should operate under.

-- High frequency trading was as hot a topic as ever. One member of the risk management committee expressed frustration that his questions on how HFT trading affected the market have gone unanswered by the CME group. CME responded by saying it’s close to launching its “Myths Project,” which will answer many of the industry’s questions. CFTC Chairman Timothy Massad said the regulator wants to study the role HFT trading plays in the derivatives markets; however, the agency’s inadequate funding has caused long delays. In other HFT related talk, an interesting lawsuit was filed earlier this month accusing a “John Doe” HFT trading firm of spoofing the treasuries market. The suit was filed by the brokerage firm where the president of the National Futures Association works, and aims to make CME Group disclose the name of the firm that in violation. You can read more details on that case here: http://bit.ly/….

(AG\SK)

Posted at 8:55AM CDT 03/19/15 by Katie Micik
 

Monday 03/16/15

Ice in Upper Mississippi River Melting; Ice Jams a Danger

The USCG ice cutter Alder begins breaking ice in the Twin Ports on March 9. (Photo courtesy of Kenneth Newhams, Duluth Shipping News)

OMAHA (DTN) -- Warmer weather is allowing ice on northern portions of U.S. inland waterways to melt and break up, leading to warnings of ice jams on major river shipping routes.

On March 10, the National Weather Service (NWS) released its north-central river forecast for the Mississippi and Illinois rivers and said ice had thickened in the north the prior week. It was beginning to break up and head south, and along with melting snow, stream flows were increasing. NWS warned that ice jams were a strong possibility until all the ice cleared out. The agency said that the heaviest ice indicted by a MODIS satellite imagery was at Lock and Dam 3 (LD) through LD15. Ice measured in that area ranged from 90% to 100% coverage with ice ranging from 5 to 19 inches thick.

The U.S. Army Corps of Engineers (USACE), St. Paul District, had hoped to reopen Lock and Dam 5A, near Fountain City, Wisconsin, on March 9, but thick ice conditions indicated that navigation will not begin on the Upper Mississippi River until later than originally anticipated. The USACE is hoping to open LD5A no later than March 23. The lock and dam was closed for renovation and maintenance on Dec. 1, 2014. The lock was dewatered to perform the work in order to repair concrete: repair, sandblast and paint the miter gates and replace the bubbler system. This extensive work occurs about every 15-20 years on each of the district's lock and dams from Upper St. Anthony Falls Lock and Dam in Minneapolis to Lock and Dam 10 in Guttenberg, Iowa.

The ice measurements at Lake Pepin on March 11 showed a slight improvement from the prior week, but still are showing ice thickness of 11 to 24 inches. Barges will not move through the lake until ice is below 15 inches. In 2014, the first barge was not able to move through Lake Pepin until Wednesday, April 16. The extreme ice thickness on Lake Pepin last winter caused the latest start to a navigation season since 1970 (excluding the flooding in 2001). On average, the start to the UMR navigation season with the first barge moving on Lake Pepin, is March 22.

Ice on the Illinois River was reported by the NWS to be breaking up and coverage was at 30% to 100%. They said the threat of ice jams will likely continue for another week. Ice jams can be dangerous to moving barges with traffic either slowing or stopping depending on the severity.

Down river at Cairo, Illinois, flooding from the Ohio River has moved above flood stage. The Ohio River crested March 15 at a level not seen since 1997. The NWS has said that the melting snow and several rainfalls have caused the flooding, and dangerous ice jams from the northern rivers will continue to be a hazard. Here is a link to the current level of the Ohio River at Cairo. http://water.weather.gov/…

THE ALDER AND HER SISTERS GO TO WORK

The USCG ice cutter Alder began breaking ice in the Twin Ports of Duluth/Superior on March 9. "Right now we are preparing the inbound and outbound track for the Duluth-Superior Harbor," Lt. J.G Barton Nanney, the deck watch officer, told the Great Lakes Shipping News. "Just getting ready for the shipping season, but also just kind of doing a little bit of recon to see how bad the ice is out there."

Nanney said this year is off to a better start. "We're looking at probably about 6 inches out here, maybe a foot in some places," he said. "We've seen a couple pressure ridges that are a couple feet thick." He reported that there were some trouble spots on the lake and that "Whitefish Bay over to the east is usually pretty thick, and no one's been over there yet. So that's going to be kind of a tell to see how bad it's going to be." He said they will keep working on the ice in the Twin Ports harbor and then head farther out onto the lake and possibly head to Thunder Bay or Marquette if ordered.

On Friday, March 13, the USCG began icebreaking operations in the St. Marys River in preparation for the 2015 shipping season. The USCG said that the ice breaking work will be "conducted by the Mackinaw (Cheboygan, Michigan), Biscayne Bay (St. Ignace, Michigan), Mobile Bay (Sturgeon Bay, Wisconsin) and Katmai Bay (Sault Ste. Marie, Michigan)." All of these ice cutters will be working toward one goal and that is to prepare for the opening of the Soo Locks, which were scheduled to re-open March 25. The Soo Locks are located on the St. Marys River between Lake Superior and Lake Huron, between the upper peninsula of the U.S. state of Michigan and the Canadian province of Ontario.

In an email sent to DTN on March 13, Ron Johnson, port director in Duluth, said, "On March 10 the Seaway opening date of March 27 was pushed back until April 2." Once the Laker season opens on the Great Lakes, the start to the grain shipping season waits for the first oceangoing vessel, known as a saltie, to make it to the Twin Ports after the making a full transit of the 2,342-mile Great Lakes-St. Lawrence Seaway. Johnson told DTN that, "Based on some conversations with some area port folks there is no official date -- just a general estimated date of mid-April for the first saltie arriving Duluth-Superior." In 2014, the first saltie did not make it to the Twin Ports until May 8 which was the latest opening to the grain shipping season on record.

On March 15, National Oceanic and Atmospheric Administration reported the Great Lakes ice coverage at 63.2% versus 82.8% on March 17, 2015. NOAA said it was the highest mark for that late in the season in more than 35 years, and it surpassed the previous mid-March high of 75.85% set on March 15, 1978.

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

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/SK)

Posted at 11:38AM CDT 03/16/15 by Mary Kennedy
 

Monday 03/09/15

STB Wants Weekly Railroad Service Reports to Become Permanent

OMAHA (DTN) -- Several shipping groups and the National Grain and Feed Association are among those voicing support for the Surface Transportation Board's proposal to require railroads to publicly file various weekly data reports pertaining to service performance.

On Oct. 8, 2014, the Surface Transportation Board made a decision requiring all Class 1 railroads to publicly file weekly data reports to the STB to "promote industry-wide transparency, accountability and improvements in rail service." (Photo by Roy Luck, CC BY 2.0)

On Oct. 8, 2014, the Surface Transportation Board made a decision requiring all Class 1 railroads to publicly file weekly data reports to the STB to "promote industry-wide transparency, accountability and improvements in rail service."

DTN reported in January that on Dec. 30, 2014, the STB issued two decisions in regard to rail service issues and service issues-performance data. The first proposal would require new regulations of permanent weekly reporting by all Class 1 railroads and the Chicago Transportation Coordination Office (CTCO). The STB is also proposing to make the weekly rail service reports permanent, saying that collection of performance data on a weekly basis would allow continuity of the current reporting and improve their ability to "identify and help resolve future regional or national service disruptions more quickly, should they occur."

Here is the link to the entire Dec. 30 decision by the STB regarding this issue: http://goo.gl/…

The STB required comments on both decisions to be submitted by March 2, 2015. Reply comments are due by April 29, 2015.

SHIPPERS WANT MORE REGULATIONS

The Alliance for Rail Competition and other rail shipper interests (ARC, et al.) wrote in their comments that they "commend the STB for its efforts to address U.S. rail service issues in recent months. We are convinced that the severe problems experienced by rail shippers since 2013 would have been far worse if the STB had followed recommendations of BNSF and CP and had taken no action."

ARC, et al. includes among their members shippers of coal and grain in unit trains and shuttle trains of 50 cars or more. "We also represent captive and other rail-dependent shippers whose shipments move in volumes of single-car shipments or in multiple car shipments of 49 cars or less. These include shipments of fertilizer, propane, sand used for fracking (including synthetic sand), oil, pipe, and pulse crops (beans, peas, lentils and the like)."

"While reports of inadequate service, and resulting adverse impacts, have been plentiful, details are lacking because of the STB’s focus in its reporting requirements on shipments of 50 cars or more." The group told the STB that while they mostly approve of the current weekly reporting system, additional reporting is needed as to service problems involving shippers that are not able to ship in unit or shuttle train volumes of 50 cars or more. Here is the link to ARC and 16 shipper organizations comments to the STB: http://goo.gl/…

The National Grain and Feed Association (NGFA), which consists of more than 1,050 grain, feed, processing, exporting and other grain-related companies handling more than 70% of all U.S. grains and oilseeds, "strongly commends the STB for proposing to make permanent the reporting of rail service performance."

In their comments to the STB, NGFA said that "such reporting also will assist in building a baseline of factual information on rail service performance that can be used as a barometer for comparative analysis by carriers, rail customers and the STB itself to evaluate future trends. There is no way to accomplish this core objective without having such data being collected and compiled on an ongoing basis." Here is a link to the AAR comments submitted to the STB: http://goo.gl/…

RAILROADS DISAGREE WITH PROPOSED REGULATIONS

The Association of American Railroads (AAR), a trade association representing the interests of North America's major freight railroads, said; "The AAR acknowledges the STB's concerns that led to the 'Notice of Proposed Rulemaking,' but respectfully submits that the reporting regulations should not be adopted as proposed because they are overbroad and may not be helpful in the long run. It is the AAR's position that only macro-level reporting metrics that the industry has long been providing voluntarily should be made permanent by regulation. In a commitment to improve communications with its customers, the railroad industry, except the Canadian Pacific who reports on their own website, has already voluntarily published such metrics on a public website since 1999." The performance measures are available online at http://www.railroadpm.org

The AAR suggested that "the STB should carefully balance the practical utility of the information it is proposing to require Class 1 railroads to report with the burdens that reporting will impose. As a result of that analysis, the STB should not make data reporting related to the current service recovery permanent, but should instead rely on system-level metrics to identify future service disruptions, should they occur." Here is a link to the AAR comments submitted to the STB: http://goo.gl/…

The BNSF submitted comments to the STB, which said; "BNSF is concerned by pressures the STB faces to add granularity to existing reporting. At various points throughout 2014, the STB has received informal and formal requests for more specialized reporting of service data, including corridor-specific and additional commodity-specific metrics. BNSF remains concerned that requests from trade associations and other shipper groups are mistaken attempts to skew service in their favor at the expense of shippers of other commodities."

"BNSF shippers already have access to significant information about network volumes and velocity, as well as robust information about their specific shipments on BNSF. Requiring BNSF to provide additional cuts of data at the individual commodity level or specific geographic sub-levels on a regular basis would be burdensome and counterproductive to BNSF's efforts to address the flow issues affecting our network as a whole. Reporting can consume critical resources without significant commensurate benefit." Here is a link to the BNSF comments submitted to the STB: http://goo.gl/…

Service on the BNSF so far in 2015 is flowing much better than at this same time one year ago. On March 6, 2014, the BNSF reported that average outstanding car orders were at 13,680 and were 19.8 days late. In their service update to the STB on March 6, 2015, the BNSF reported that outstanding car orders totaled 2,569 and average days late were 16.3. In fact, all Class 1 railroads have reported improved service at this time versus one year ago.

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

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/BAS)

Posted at 11:46AM CDT 03/09/15 by Mary Kennedy
Comments (1)
Just what we need, More government employees to put paper on a shelf.
Posted by Bonnie Dukowitz at 8:19PM CDT 03/16/15
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