Market Matters Blog
Katie Micik DTN Markets Editor

Thursday 07/02/15

Record Trading Volumes in Ag

Tuesday, June 30, 2015 set records.

CME Group's agricultural futures and option products did record volume: 2.87 million trades. It was the largest volume day since... last Friday (June 26).

Combined corn futures and options volume: 1.12 million

Corn futures only: 845,700

Combined soybean futures and options: 722,777

Soybean futures only: 503,063

Cash bushels traded electronically on DTN Portal: 16.7 million bushels, which was more than double the previous record set Thursday, June 25. Overall, 54.8 million bushels traded during June.*

DTN analyst Todd Hultman said excessive rainfall cast doubt on yield potential, and then USDA's Grain Stocks showed smaller supplies of both corn and beans than the market expected.

"Anytime you get a surprise that alters the prevailing view of the markets, there is a lot of running for the doors," DTN analyst Todd Hultman said. "The June 30 reports are notorious for such surprises and Tuesday’s numbers refuted a lot of early fundamental biases about this year’s balance sheets for corn and beans."

DTN Senior Analyst Darin Newsom agrees, and adds that noncommercial traders held a large net short position going into Tuesday's reports. "Buy orders were running amok, particularly in the last half hour of trade when even wheat was goosed to a higher than expected close."

Commercial traders may have been involved in the action for part of the day, "but as overnight basis and today’s action showed, they may have moved to the sidelines.

"It doesn’t change this group’s long-term outlook though: Still bullish soybeans, neutral corn, and increasingly bullish (but easily changed) toward wheat."

*More than 45,000 farmers have made offers to sell grain to their local elevators through DTN Portal or Farms Technology DPP Grain Desk. The two programs teamed up in 2014 to maximize their strengths, and the popularity is growing.

In the first five months of 2015, more than 150 million bushels had been offered through Portal, up 40 million bushels during the same time frame the previous year, according to DTN agribusiness product manager Don Konz. More than 1.3 billion bushels have been offered for sale on Portal since it went live in 2007.

In early June, DTN Portal launched branded apps for CHS, Valero Renewables and Green Plains Grain that allow farmers to make offers to any of those companies' locations.

For farmers, DTN Portal is way to make, manage and monitor their offers to their preferred locations. For the elevators, Portal offers a comprehensive grain management platform that lets merchandisers accept offers, automatically hedge their purchases and view their entire position in real time, all while integrating with most accounting systems.

Konz argues that offers are the best way to judge how widely electronic cash markets are being adopted. How many bushels that actually trade through the platform, like Tuesday's 16.7 million bushel record, largely depends on market conditions -- like this 60-cent corn market rally.

(AG/ES)

Posted at 10:27AM CDT 07/02/15 by Katie Micik
 

Monday 06/29/15

Additional Rains Add Insult to Injury Caused by Tropical Storm Bill

When Tropical Storm Bill exited the U.S. on June 21, it left behind rainfall totals of 4 or more inches in eight states: Arkansas, Illinois, Indiana, Louisiana, Missouri, Ohio, Oklahoma and Texas, according to the Weather Channel.

This flooded field of soybeans is located in Wells County, Indiana, near the Huntington Reservoir along the Wabash River. The Wabash River flows over 475 miles to its confluence with the Ohio River. This field has been under water for more than a week. (Photo courtesy Derek Blair, northeast Indiana)

The arrival of Bill caused rivers in Texas and Oklahoma, which were already swollen due to heavy rains that fell over the Memorial Day weekend, to spill over again. Rivers in Missouri and Louisiana also suffered from Bill as flooding covered not only city streets, but farm fields that had just been planted with spring crops or were not yet planted. According to USDA, as of June 21, farmers in Missouri had only planted 51% of their soybeans versus the five-year average of 88% and that only 34% of the soybean crop was rated in good-to-excellent condition.

The National Weather Service issued a flood warning on Saturday, June 27, for the Missouri River at St. Charles. The river there was at 29 feet on Sunday, June 28, and is expected to crest at 30.3 feet Monday afternoon. That would be just over 5 feet above flood stage. (http://goo.gl/…) On June 28, the NWS also issued flood warnings for the Wabash River, which was 22.8 feet at Lafayette, Indiana; moderate flood stage is 20 feet. The NWS said, "At 22.0 feet, extensive flooding is in progress. During agricultural season, extensive crop damage occurs. Flooding will last from two days in central Indiana to the middle of July in southwest Indiana." (http://goo.gl/…)

Besides the stress on soybean crops, the soft red winter crop has suffered as well with diseases caused by too much rain. The CBOT price for soft red winter rose as Missouri, Indiana and Illinois were reported by USDA June 22 to have significant condition declines from the previous week. The front-month nearby Chicago wheat contracts traded to the highest levels seen since early January. For the week ending July 26, the July futures contract gained 73 3/4 cents per bushel in Chicago. Cash basis, on the other hand, was weaker at river facilities affected by the high water with basis 7-10 cents weaker on average.

HIGH WATER LEVELS AFFECTING BARGE MOVEMENT

Just as many rivers had crested, more rain fell during the week of June 22, causing some of the rivers to climb back toward major flood stage. Tom Russell, Russell Marine Group, updated DTN in an email on June 29 on the most current river conditions. "High water on the Illinois River, Upper Mississippi middle area mile 300, and Upper Mississippi from St Louis to Cairo remain problematic," said Russell. "The rain pattern that has dropped concentrated amounts of rain in center areas of Midwest and Illinois River dropped more rain last weekend. The rain pattern in this area is forecast to drop slight to moderate amounts of rain in the area this week. Drying not expected to occur until July 9. Navigation in these three areas is difficult and very slow at best with some areas entirely closed. The situation is 'touch and go' and will require ongoing daily monitoring until general drop in water levels start to occur."

Russell said "Illinois River will see a rise due to weekend rain and some parts of the river are near record high levels set in 2013. Areas near the mouth of the river mile 30 to 89 will close due to high water and fear that levees may be compromised. The river in area of closure will not crest until July 4 -- 5 without additional rain. However, some rain is forecast throughout this week."

"On middle part of Upper Mississippi locks 25 (mile 241), 24 (mile 273), 22 (mile 301) were closed due high water last few days. However, weekend rain has not impacted this area and these locks are opening again to navigation by June 30," added Russell. "In the Upper Mississippi River at St Louis to Cairo, the St Louis Harbor did not close this past weekend as expected. The river level stopped rising just below closure levels. Some tows are moving out of the Harbor but it is extremely slow going and the Harbor remains heavily congested with back log of barges waiting to move."

All of the above areas are at critical mass and minor changes in rainfall or adjustments in water levels can mean the difference between rivers remaining open or closed, according to Russell. "Changes are occurring daily and will require close monitoring until there is a general improvement in conditions."

On June 25, USDA reported barge operators are not quoting rates for Illinois River barge services until most loading facilities are operational, which will occur sometime after the crest. "Barge operators have limited operations in the St. Louis area partly due to accumulations of flood-caused debris that can damage towboats and barges. In addition, tows of barges greater than 600 feet are restricted to daylight-only passage while the St. Louis gauge is greater than 25 feet," USDA reported. (http://goo.gl/…)

Russell said, "Elsewhere, The northern parts of Upper Mississippi River, Ohio River, and Lower Mississippi are OK at this point. The Arkansas River that had been closed due to high water is now entirely open. Some areas are daylight transit only."

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

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/SK)

Posted at 1:06PM CDT 06/29/15 by Mary Kennedy
 

Monday 06/22/15

Tropical Storm Bill Adds to Already High Water Conditions

OMAHA (DTN) -- Last month, heavy rains moved across Texas and Oklahoma then through the center of the Midwestern states. The result was flooding and high water on the Missouri, Arkansas, Illinois and Upper Mississippi rivers between St. Louis and Cairo, Illinois. As Tropical Storm Bill came up from the Texas coast last weekend and became a tropical depression, it moved through most of the same waterlogged states, adding more water to the already high rivers.

Upper Mississippi River Lock 27, near St. Louis, moves more cargo than any other navigation structure on the Mississippi River. The actual location of the Lock and Dam is Granite City, Illinois. (Photo courtesy of USACE)

Tom Russell of Russell Marine Group told DTN via email that, "Waters were in the process of flushing through the system when heavy weather concentrated rains in those central areas again, giving rise to the same rivers."

Russell said that the Illinois River and Upper Mississippi between St. Louis and Cairo are now at flood stage. "Two locks on the Illinois River have been closed to all navigation due to high water, resulting in the CME declaring force majeure at loading locations on the Illinois River." http://goo.gl/…

On June 17, the CME released this statement: "Effective immediately and until further notice, pursuant to CBOT Rule 701 ("Declaration of Force Majeure"), The Board of Trade of the City of Chicago, Inc. ("CBOT" or "Exchange") is hereby declaring a condition of force majeure for corn and soybean shipping stations as a majority of the facilities on the Illinois River are unable to load due to high water levels and/or flooding. As a result, CBOT Rule 703.C.G(8) is in effect for ALL corn and soybean shipping stations." http://goo.gl/…

"St. Louis Harbor has become extremely congested as a result of high water over the past weeks," Russell said. "Heavy drift debris is reported throughout the harbor. Barge traffic is moving, but slowly, and in a bit of gridlock. High-water safety protocols have been put in place."

On June 21, the U.S. Army Corps of Engineers said on their website that, "Flood fight teams have been deployed across the area and are providing technical assistance to levee districts. The Jerry Costello Lock and Dam and the Lock 27 Auxiliary Lock remains closed."

The USDA Grain Transportation Report noted on Thursday that since early June, the St. Louis gauge has been above 25 feet, "a threshold where the Coast Guard restricts tows of barges greater than 600 feet to daylight-only transit in the St. Louis Harbor." With the additional rains from Tropical Depression Bill, the river level is not expected to drop to 25 feet until possibly June 27, when the daylight-only restrictions could be lifted, according to USDA. http://goo.gl/…

Oklahoma news sources reported that The Port of Catoosa was experiencing high water along the port's entire waterway system, which shut down barge traffic late in the week. Russell noted that while navigation just resumed on the Arkansas River, the remnants of Bill may stop traffic again as waters are expected to approach flood stage again.

"The Lower Mississippi is high and will remain high at least for another three to four weeks as the upper rivers run off," said Russell. "The northern part of Upper Mississippi and Ohio Rivers are at normal levels and traffic is moving. The Baton Rouge and New Orleans Harbor are in high-water protocols with safety advisory for barge tows passing through Baton Rouge. Barge and ocean vessel traffic are moving, but count on delays over the next three to four weeks."

SOYBEAN BASIS RISES WITH THE RIVERS

High water can not only stall empty barges from arriving at river terminals, but it can also cause the inability of a barge to "fit" under the loading spout. The spot CIF barge basis was reported to have traded 10 cents higher on Wednesday, June 17, from Tuesday's spot price. By the end of the week, CIF basis was 5 cents weaker, but the bid/ask spread at +80 versus +97 over the Chicago July futures. CIF basis offers were 16 cents higher on Friday June 19 than from the prior week. Farmers have been selling soybeans on the futures rallies, but the logistics of getting them to the Gulf have been tedious and will likely be that way for the next week.

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

Follow Mary Kennedy on Twitter @MaryCKenn

(SK/AG)

Posted at 11:43AM CDT 06/22/15 by Mary Kennedy
 

Wednesday 06/17/15

Cotton's Acreage Conundrum

DTN China Correspondent Lin Tan sent us an article about China's declining cotton acreage earlier this week. Farmers there have planted 20% fewer acres to cotton than they did the year previous, marking two years of decline.

Cotton acreage in the U.S. is also taking a hit this year. According to USDA's Prospective Planting survey, farmers were only likely to plant 9.55 million acres, down 13% year over year. With the heavy rains in Texas this spring and early summer, there have been plenty of reports about cotton acreage declining even more.

It's just one of the many things to watch for in USDA's June 30 Acreage report. But the real question is: when will the world work through its glut of cotton stocks? With global stocks-to-use around 92%, it seems there's a lot of work that needs to be done to turn the cotton prices around.

In the meantime, here's Lin Tan's story for a better perspective on why cotton is falling out of favor with Chinese farmers.


China Cotton Acres Seen Down 20%

By Lin Tan

DTN China Correspondent

BEIJING (DTN) -- Cotton acreage is expected to decline 20% in China this year, down to 8.4 million acres from last year's 10.4 ma, according to a recent field survey by the China National Cotton Market Observing System.

"This is the second year of sharp decrease in cotton acreage," said Zhonghua Wang, an analyst in Beijing. "Last year's acreage was 12.5% lower than 2013/2014."

DTN Analyst Todd Hultman said a 20% decline in acreage is steeper than the 10% USDA's currently predicting. "I would say there are slow bullish changes emerging in cotton, but it is difficult to tell how long it might be before prices actually climb higher.

"It also helps that USDA is estimating a 16% drop in U.S. planted acres this year, and that may even turn out to be less with this year's excess rain in the Southern Plains. The difficulty for cotton is that it will take time to work off the heavy burden of world ending stocks that USDA estimates at 106 million (480-lb.) bales or 92% of annual use."

China's acreage is due in large part to a change in China's support policy to a target price program. Lower prices didn't help either, Wang said.

"The Chinese government terminated the floor price purchase program on cotton last year," he said. "The program had supported cotton prices for several years, but the uncertainty of the market after the policy change put pressure on farmers to produce more cotton" before the program changed.

The floor price in 2013, the last year of the program, was $1.49 per pound. The new target price program for cotton attempts to subsidize farmers based on their output and comes in the form of a direct payment, which doesn't affect the market price. The government sets the target price and then calculates an average market price for each province. Farmers are paid the difference between the average in their province and the target price.

"Upon June 10, national cotton price index is 13,329 renminbi per ton (98 U.S. cents per pound), down 23.3% compared to the price of last year," said Fang Gao, Deputy Chairwoman of China Cotton Association.

The government lowered the target price for this year's crop, Gao said. Last year, the price was $1.45 per pound. It is 5 cents lower this year at $1.40.

The current estimate of cotton production is 5.86 million metric tons, less than last year's 6.39 mmt.

"This acreage change is good for China's cotton market and also good for the state reserve," Wang said. "We are expecting the carryout in 2015/2016 will be 12.66 mmt, 0.31 mmt less than the carryout of 2014/2015."

While stocks are expected to decline, Gao said the carryout will still be too high. Overall consumption in expected to be 7.35 mmt.

Imports have fallen off sharply as China's textile industry tries to work through the stockpile. So far in the 2014/15 marketing year, China's only imported 1.17 mmt of cotton, down 44.5% from the same time period last year.

"China is expected to import only 1.58 mmt of cotton in the crop year of 2014/15," Wang said.

The U.S. is still the largest exporter to China, with a 30% market share. It's followed by India with 21%, Brazil with 15%, Australia and Uzbekistan with 12% each, and a handful of other countries sharing the remaining 10%.

(AG\SK)

Posted at 2:46PM CDT 06/17/15 by Katie Micik
 

Monday 06/15/15

STB Reviews Rail Transportation of Grain, Rate Regulations

OMAHA (DTN) -- Grain shippers, ag organizations and railroad companies all had the opportunity to express their opinions about improving procedures to set fair shipping rates during a hearing held by the Surface Transportation Board June 10 in Washington, D.C.

Canadian Pacific train heading through the Twin Cities corridor. (DTN file photo by Mary Kennedy)

Through these meetings the STB intends to explore the issue of "making the rate-case process more accessible" to all grain shippers who use rail as their mode of transportation. The Staggers Rail Act of 1980 provides rail shippers the ability to challenge unreasonable rates.

"Yet, despite concerns about high rates from shippers of grain over the years, no such shipper has filed a rate complaint with the agency since 1981," said the STB. Shippers say some of the reasons could be the current formula is arbitrary, too costly and onerous, which discourages them from taking part in the current process.

In her opening remarks at the hearing, acting STB Chairman Deb Miller said that she has heard from grain shippers who "don't feel they have received all benefits of Staggers Act."

Vice Chairman Ann D. Begeman added, "We are not here to debate rates, but rather to fulfill the statutory mandate to ensure a process for every shipper to have access to that rate judged fairly and timely."

The National Grain and Feed Association (NGFA) urged the STB to "issue a proposed rulemaking to establish a new process that agricultural commodity shippers could use to challenge freight rates they believe are unreasonable or unlawful under the Staggers Rail Act of 1980." (See the proposal at http://goo.gl/…)

In a June 11 press release, the day after the hearing, the NGFA said that, "As part of the STB's proceeding (Ex Parte 665, Sub-No. 1), NGFA in 2014 developed and proposed a new rate-reasonableness methodology -- dubbed the "agricultural commodity maximum rate methodology" -- as one approach that the STB could use to change its existing procedures to resolve rail rate challenges involving agricultural products."

The NGFA noted that its proposed new approach would "meet the tests of being more accessible and inexpensive to administer, including for shippers with smaller claims; provide a meaningful constraint on the ability of carriers through their rate-pricing practices to make certain facilities uncompetitive in shipping by rail, and provide for more expedited and timely decisions."

According to the NGFA press release, NGFA Board member Bruce Sutherland, vice president of Michigan Agricultural Commodities (MAC), presented "real-world" examples to the STB of current rate-pricing practices by a major Class I rail carrier that will significantly alter geographical rate spreads in the Eastern Corn Belt. Sutherland explained to the STB at the hearing that this could lead to "dramatically increased freight rates and reducing the prices elevators are able to pay to producer-customers in some parts of the region, while reducing traffic on regional short lines and making some facilities uncompetitive to serve customers by rail."

Tim Luken, manager of Oahe Grain, an elevator located on a short line railroad in Onida, South Dakota that is serviced by the Canadian Pacific, told DTN via email, "Back in 2007, it cost $2,644 per car on the short line for the 25-car rate to Chicago and beyond. Today it costs $3,881 per car to Chicago and beyond; a 46.8% increase in eight years."

Representatives from the Class 1 railroads were also present at the hearing to testify on the current rules in place. BNSF stated in its presentation that, "Formulaic, outcome-oriented regulations are not productive and would have unintended consequences." (http://goo.gl/…)

Union Pacific pointed out that, "Previous studies have concluded that many agricultural shippers have a range of transportation alternatives, that grain transportation markets are largely competitive, and that different modes of transportation often compete head-to-head to move grain." (http://goo.gl/…)

CSX Transportation told the STB that, "Agriculture is an important business to CSX; competition on origin and destination grain sourcing is vibrant. CSX is working to improve efficiencies for both CSX and our customers through mutually beneficial programs." (http://goo.gl/…)

Stu Letcher, executive vice president of the North Dakota Grain Dealers Association, told DTN in an email, "The current system for challenging rates is overly burdensome according to testimony from participants on both sides of the issue. We understand the need for and support a financially stable rail industry, but we feel a more transparent and efficient process for grain rate reviews would not put that stability in jeopardy."

The STB will conduct a separate, but related, public hearing on July 22-23, which will examine what it means for a railroad to be revenue adequate and how that should affect regulation of the railroads' rates and other related issues. The STB said that once a railroad becomes revenue adequate over a period of time, "shippers should be able to challenge such railroad's rates on grounds that the carrier is financially healthy and thus does not need to charge such high rates."

UPDATING CURRENT METHODS

The Transportation Research Board (TRB) recently conducted a study examining the future role of the STB in overseeing and regulating the service levels and rate offerings of railroads, particularly as they become revenue adequate. The TRB said, "The study committee finds that while the U.S. freight railroad industry has become modernized and financially stable since the Staggers Rail Act of 1980, some of the industry's remaining economic regulations have not kept pace and should be replaced with practices better-suited for today's modern freight rail system." The report was released to the public June 10. (It can be found, in its entirety, on the Web site of the National Academies Press http://goo.gl/…)

In a press release on their website, Association of American Railroads (AAR) President and CEO Edward R. Hamberger provided the following response to the report released by the TRB: "The TRB report is a solution in search of a problem," said Hamberger. "The United States already enjoys the most efficient, safest freight rail network in the world. In fact, freight rail customers today pay rates that are on average 43% less than they paid in 1980. The report is a theoretical exercise that would upend the real-world concrete successes achieved since the Staggers Act passed in 1980."

The STB will begin reviewing all comments and presentations before making any decisions and stated, "Following the hearing, the record will remain open until June 24, 2015, during which time parties may submit written rebuttal testimony."

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

Follow Mary on Twitter @MaryCKenn

(AG/ES

Posted at 12:23PM CDT 06/15/15 by Mary Kennedy
 

Friday 06/12/15

TAS Orders Available Starting Monday

CME Group is rolling out a new futures order type for agriculture products next Monday to help smooth the transition to electronic-only trade, and experts believe the new trade at settlement (TAS) order type has beneficial aspects for the grain industry.

TAS, as it's commonly referred to, allows market participants to buy or sell futures contracts during the day equal to the yet-to-be-determined market settlement price plus or minus 4 ticks, said CME Director of Commodity Products Tim Andriesen. One tick is one-quarter of a cent.

During harvest, this could give grain elevators the ability to pre-hedge the bushels they plan to buy after the market closes at the settlement price. It could also give the market a little more flexibility when it's locked in limit-up or limit-down trade.

"So any time during the day, I could say I want to buy 10,000 bushels of corn at the settlement price, and I'm willing to pay 1 tick more than the settlement price to get that done," Andriesen said. "It is a market, so you have to have somebody who is willing to sell it to you at 1 tick more."

The order will execute, but the absolute value of it won't be known until after the market settles at 1:15 p.m. CT.

TAS orders will replace market-on-close (MOC) orders, a type of order that can be executed in open-outcry pit trade but not on CME's Globex platform. CME will be closing its futures pits after the July 2 trading day. Options pits will remain open for grains, oilseeds and livestock markets.

Settlement in the grains will remain at 1:15, but the electronic futures market will continue to trade until 1:20 p.m. effective Sunday, July 5 for the July 6 trading day.

Diana Klemme, vice president of Grain Service Corporation, said the people who are most likely to use TAS orders already used MOC orders to buy or sell before weekends or overnight.

"Frankly, I think they will find it more useful and like it better than the old system," she said.

On a recent conference call with grain elevators, no one said they thought the idea was horrible. They had very few questions and found it reassuring that TAS has been in use in other markets for quite some time.

In the energy markets, 97% of the TAS business is done at flat, which means at the settlement price or plus 1 tick, Andriesen said. "Some of the time trying to do MOC orders, you would get a fairly good-sized range on the settlement and it might be more than 1 tick off the settlement price where you got your pre-hedge executed."

Klemme said the switch to TAS will help avoid other issues that can arise with MOC orders, like calling your broker only to find that everyone's trying to do last-minute business and you can't get the order through.

For grains, TAS orders will be available on the first three listed contracts, plus the first new-crop month, if it's not already represented in the first three months. So on June 15, TAS will be available on the July, September and December corn contracts. In February, TAS will be available on the March, May, July and new-crop December contact. TAS will be available for corn, soybean (including meal and oil) and wheat, but not for rice and oats.

In the livestock markets, TAS will only be available of the first two listed contracts.

TAS will also be available on spreads. For grains, it'll be available on the old-crop, new-crop spread and the first two listed calendar spreads. For livestock, it'll only available for the first listed spread.

Andriesen and Klemme said it'll take time for the industry to learn about TAS and start using it. They think TAS will likely be a popular tool to help grain elevators hedge at times of year when they expect to buy a lot of grain during non-market hours, like harvest. It could also be an option on days when the market locks limit up or limit down.

TAS lets you trade the settlement price +/- 4 ticks, Andriesen said. In theory, that adds about a penny to the limit. He anticipates that on locked-limit days TAS orders are more likely to be filled if they're the settlement price +/- 4 ticks because they allow a little more room for a trade to take place. It'd be less likely that a settlement +/- 1 tick would be filled.

"It does allow a little bit more space on limit days," he said. "Keep in mind that this is a market, so to trade TAS, a TAS buyer and a TAS seller have to match on price and on quantity. Putting in a TAS order doesn't necessarily mean you will get it done."

On locked-limit days, Klemme said, "we'll find out how it works. It doesn't take anything away, and it just might let us get things done that we might not have been able to do before."

Klemme said TAS reminds her of the 1980s when options were first introduced in ag products.

"No one knew what a put or a call was. But what we learned over time was that marketing with just futures was like using a sledgehammer, and marketing with options was much more like using a scalpel. There are some things TAS will let us do on the close to limit risk that we couldn't do with MOC orders. It'll take a while to learn what you can do with it, but we'll adapt."

If you'd like more information on TAS, please visit www.cmegroup.com/agtas

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

Follow Katie Micik on Twitter @KatieMDTN

(AG/BAS)

Posted at 11:02AM CDT 06/12/15 by Katie Micik
 

Monday 06/08/15

Rivers Fill Up, Wheat Condition Worsens, Harvest Slows

Heavy, frequent rains in the central Plains filled the Missouri River up over its banks last week, along with creeks and streams in the same area. In a span of 36 hours, the river near Waverly, Missouri, rose three feet to 29.38 feet on June 7.

Rivers are filling up from frequent rains. This map of the Missouri River Basin is from the USGS.

Adam Casner, a farmer in Carrollton, Missouri, told DTN via email he expected to be "heading for higher ground" on June 5 after packing up his home, equipment and tools as the flood waters threatened. He farms next to the levees along the Missouri River and said the water they were getting was "seep water," which is sitting in his corn fields. Casner said the water is "like a heavy rain that won't drain and will stand till the river goes down."

As of 8 p.m. June 6, the levees along the river were less than a foot from overtopping. The river crested the afternoon of June 7 at 29.42 feet and as of Monday morning, levels were at 26.74 feet. Minor flood stage is 20 feet; moderate flood stage is 29 feet; major flood stage is 31 feet.

Farther north near the confluence of the Missouri and Yellowstone rivers in North Dakota, the river breached minor flood stage on the morning of June 7 at 22.45 feet and was expected to crest at 22.9 feet late that day. Here is a link to the current status of the river: http://water.weather.gov/…

Heading south again, the historic rain fall that occurred in the Texas Panhandle and Oklahoma during May caused a "significant fast rise" on the Missouri River, and the Arkansas River as well, according to Tom Russell, Russell Marine Group. Ingram Marine said on their website June 8 that the Arkansas River was experiencing high water conditions and the river was closed to navigation.

Russell told DTN in an email, "as the remainder of the rain system moved north, it did give slight rise to Illinois River and Upper Mississippi between St. Louis and Cairo, but manageable. As this water flushes down the Lower Mississippi it will keep water levels slightly high but manageable from Cairo to New Orleans."

"Water levels in the Baton Rouge and New Orleans harbors will remain high enough throughout the balance of June to keep safety protocols in place, which have only been lifted for a brief period of time during mid-May. River levels are to remain slightly high and safety protocols in place at least until second half June," said Russell. "Barge and ocean vessel traffic is moving and loading with only minimal slowdowns due to water levels."

DTN Senior Ag Meteorologist Bryce Anderson said "While flooding is occurring in the lower Missouri River in central Missouri, along with the Red River and Arkansas River in eastern Texas and western Louisiana, there is very little additional flooding forecast this week. Rainfall will be light, less than .25 inches, in the majority of the Plains and Midwest through Thursday. The pattern does turn wetter in the Midwest from Thursday through Saturday, so by next week we could see more flooding in the Missouri River. Central Texas stays on the light side for rainfall all week; thus, a new round of flooding in the Red and Arkansas does not look imminent."

Another useful link:

http://water.weather.gov/…

Rains Affecting New-Crop Winter Wheat Harvest/Quality

Heavy rains that battered northeast Colorado, northwest Kansas and southern Nebraska over the weekend will likely deteriorate winter wheat conditions further. In addition, heavy rains in Texas, Oklahoma, Ohio, Arkansas and Missouri the past few weeks have already caused harvest delays and quality downgrades in winter wheat.

The U.S. Wheat Associates June 5 harvest progress report said "Another week has passed with no harvesting in the southern SRW growing region due to continuing rain and extremely wet fields. The HRW wheat harvest is finally just starting in north Texas through central Oklahoma. Areas in south-central Texas have been ready to harvest for several weeks, but wet conditions are still keeping most combines out of the fields."

The USW report added, "There are concerns about the likely occurrence of the fungal disease fusarium (head scab) in the HRW crop from northern Texas to southern Nebraska because of the consistently cool, wet spring weather." Adding to that is the probability proteins may be lower and sprout damage will cause lower falling numbers which, depending on the severity, will cause mills to reject it.

The cash price reacted to the harvest delays and quality concerns, rising to 36 1/2 cents in the Kansas City July futures last week. SRW basis levels improved slightly and protein premiums for spot HRW moved higher. Premiums for 11 through 11.8 proteins are 5 cents stronger from one week ago; 12 through 12.8 proteins are 3 cents stronger with 13 proteins a 5 cent premium to 12's and 14 proteins a 7 cent premium to 13 proteins. Winter wheat basis usually wants to weaken once harvest starts, but until the harvest gets into full swing and there is a better handle on quality, quantity and proteins, the cash market will likely remain firm.

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

Follow Mary on Twitter @MaryCKenn

(CZ/BAS)

Posted at 2:00PM CDT 06/08/15 by Mary Kennedy
 

Tuesday 06/02/15

Will Farmers Keep 2014-15 Corn Through the Next Harvest?

A recent DTN poll revealed that a large number of farmers plan on keeping some or all of the corn they have left in storage from the 2014-15 season through the next harvest. Below is a recent article on the topic, but I wanted to ask you -- what are you planning to do with your stored corn? What perils, pitfalls and possible rewards do you see in this kind of strategy?


More than 25% of the respondents to a recent DTN 360 Poll said they're willing to roll the dice and see if holding 2014-15 corn into the new-crop marketing year will fetch a better price.

A majority of the 305 responses to the non-scientific poll -- 58% -- said they plan on selling all of their corn in storage within the next two months or before harvest. But 27% plan on holding their corn into October and beyond. Another 15% plan on selling part before harvest and waiting to see what the market does before they sell the rest.

"I don't see any surprises in this poll, with almost 60% looking to clear space before harvest," DTN Senior Analyst Darin Newsom said. "As I discussed in last Friday's column, this fits in with the seasonal tendency of the DTN National Corn Index to move lower in July, while basis also weakens." (NCI.X versus the September from the last week of June through the last week of July).

At the end of March, USDA estimated farmers held 4.38 billion bushels of corn on the farm. Another 3.36 billion bushels were stored in off-farm locations.

There's probably been a steady flow of farmer selling since then, DTN Analyst Todd Hultman said, but there's been nothing dramatic enough to cause big moves in the basis. A large basis move would be an indicator that farmers had started selling grain from their storage.

Hultman said the inclination to empty the bins before the next harvest is not a surprise, and "reinforces the neutral to bearish trend in corn prices as it ensures that commercials should have no worries obtaining corn this summer.

"The 42% of respondents who intend to store all or part of their corn past harvest may change their minds if they don't see any hot and dry weather materialize this summer."

The poll was taken from April 27 to May 8.

A second DTN 360 poll, taken from May 8 to May 20, showed that 49% of respondents felt confident in their ability to keep grain in good condition through summer.

Eleven percent mentioned they had concerns about keeping bins monitored due to other responsibilities on the farm. A full 17% said they're "hoping for the best."

Thirteen percent said they'd purchased new monitoring equipment or assigned the responsibility to a specific person. Six percent moved grain to a commercial elevator.

"The bottom line, in my opinion is that farmers generally view themselves as solid quality managers so have no problem storing corn beyond this year's harvest," Newsom said.

(AG/CZ)

Posted at 10:41AM CDT 06/02/15 by Katie Micik
 

Monday 06/01/15

Even Still, All is Not Quiet at the Western Ports

After nearly 10 months of labor slowdowns resulting in monetary losses to container shippers, the members of the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) ratified a new five-year contract on the West Coast which is retroactive to July 1, 2014, and runs through June 30, 2019.

Truck container chassis at the Port of New York. Chassis inspections negotiated in the West Coast labor dispute are a sticking point. (Picture courtesy American Trucking Associations)

According to the PMA website the contract, which covers 29 ports on the West Coast including major container ports in Los Angeles, Long Beach, Oakland, Portland, Seattle and Tacoma, features an "enhanced arbitration system" designed to support waterfront stability, capacity growth and productivity. "This is especially important given the increasingly competitive environment West Coast ports face now and into the future from a variety of factors, including the long-anticipated opening of the expanded Panama Canal," PMA stated.

"Health care changes maintained in the contract will foster greater efficiency, cost containment and fraud prevention for the long-term. To date, these efficiencies have already delivered significant savings to the health care plan. At the same time, ILWU members will continue to enjoy a very generous, employer-paid health care plan. The agreement also features wage and pension increases for ILWU members," the PMA statement continued.

The one catch in this contract that is now causing problems for trucking companies at the port is the agreement the PMA made with the ILWU workers allowing them jurisdiction over the maintenance and repair of truck chassis. While this agreement does not allow the ILWU to inspect trucker-owned chassis, the process is creating a slowdown in trucks' ability to enter the port. All trucks are pulled over because there is no way to immediately tell if they are privately owned. Curtis Whalen, executive director of the American Trucking Association's (ATA) intermodal conference told DTN via phone, "The whole process is illegal and the ILWU has no legal right to stop the truckers." Even still, Whalen said the unions continue to "do what they want," whether it is legal or not.

Whalen pointed out "the intermodal equipment provider (IEP) is responsible for roadability and under law, inspections are done long before the trucks arrive at the ports." Shipping lines no longer own the chassis after selling most of them to IEPs, mainly to save themselves money. Whalen said this means the PMA, which represents the shipping lines, has no authority over the chassis inspection. Whalen said the "union and PMA had no right to negotiate over something they do not own."

The Federal Motor Carrier Safety Administration (FMCSA) has rules and regulations governing ocean carriers, railroads, chassis pool operators and other IEPs. These rules, issued in December 2008, affect the chassis, which are special trailers that hold cargo containers when they are transferred from ship or rail to truck for final delivery. The new regulations made IEPs subject to the FMCSA rules for the first time, and establish shared safety responsibility among IEPs, motor carriers, and drivers. "We want to ensure that every piece of equipment traveling on our highways is operating safely," said FMCSA Administrator John H. Hill in a Dec. 17, 2008 press release. Here is a link to the press release and new regulations: http://goo.gl/…

Whalen told DTN he has already notified the FMCSA in Washington DC, about what is happening on the West Coast. Whalen said if the ILWU continues to pull trucks over, truckers may refuse to haul to the ports, causing a loss of truck drivers in an industry that is already experiencing shortages.

NEGATIVE EFFECTS OF LABOR SLOWDOWNS STILL LINGER

Mike Hajny, vice president of Wesco International, a hay exporter in Ellensburg, Washington, told DTN in an email that their volume of orders has dropped off significantly due to too much inventory in certain countries such as Japan or Korea. "When the port slowdown was in full swing, customers such as Australia, Spain and Pakistan had to move to find other sources for forage. That product turned out to be less expensive and filled warehouses," said Hajny. "After the PMA/ILWU announced their agreement, cargo magically started to flow out of West Coast Ports. As it arrived in Japan and Korea, the warehouses were full of product from other countries and there was nowhere for USA cargo to go."

Hajny said now the market is in an "over-supply situation. Of course issues with container free time have caused many customers to move into 'price dumping mode' and offer product at a loss, just to get it off the docks. This has caused tremendous confusion in the market and has caused any vigor in the market to evaporate. Worst issue is, 2015 crop harvest is underway in USA, and there is little to no interest at this time from customers. Paint it however you will, but this is a direct result of the port slowdown and cargo not moving smoothly for four months."

Portland is another issue, Hajny added. "With no shipping line with direct call to Portland, everything has to be moved by rail or truck up to Seattle/Tacoma. Space is limited on the rail and it's difficult to get bookings at times. Trucking adds tremendous time and costs to the shipments. It's just not pretty, and it probably is going to stay that way."

The Washington apple industry also continues to feel pain from the West Coast slowdown. AP reported "a record crop of apples, coupled with the West Coast port slowdown earlier this year, is taking a toll on Washington apple growers. Nearly $100 million worth of apples that cannot be sold have been dumped into fields across central Washington, the nation's most productive apple region. The apples are being left to rot and compost in the hot sun, an unusual occurrence for an industry that has found ways to market ever-growing crops."

Todd Fryhover, president of the Washington Apple Commission in Wenatchee told the AP, "If we wouldn't have had the port slowdown, we wouldn't have needed to dump apples. The ports dispute created numerous problems for farmers. A big issue is that apples loaded into unrefrigerated containers sat on docks for weeks waiting to be loaded on a ship." Fryhover added that he estimates apple exporters lost at least three weeks of their season because of labor problems at West Coast ports. "Along with a record supply of apples, that created surpluses that could not be shipped profitably to markets or processors," Fryhover said in the AP article.

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

Follow Mary Kennedy on Twitter @MaryCKenn

(CZ/SK)

Posted at 11:49AM CDT 06/01/15 by Mary Kennedy
 

Friday 05/29/15

USDA: Ag Exports at $140.5 Billion

USDA's latest forecast for agricultural exports in fiscal 2015 shows a $12 billion year-over-year decline to $140.5 billion, which is the third highest on record but the lowest estimate since 2012.

Most of the decline comes from high-value products like the $1 billion horticultural, fruit and vegetable products. The forecast for livestock, poultry and dairy exports was lowered $500 million on increased global competition for dairy products and reduced poultry exports following the avian influenza outbreak.

The outlook for oilseed and grain and feed exports brightened. USDA's quarterly Outlook for U.S. Agricultural Trade said exports of oilseed and oilseed products increased $100 million as high soybean meal values offset lower soybean prices. The forecast for grain and feed exports increased $600 million on higher sorghum and DDGS sales.

"The strong pace of American agricultural exports continues, with a trade surplus of more than $23 billion, a $1 billion increase from earlier projections for fiscal year 2015," Agriculture Secretary Tom Vilsack said in a press release. "Fiscal years 2009 to 2014 represent the strongest six years in history for U.S. agricultural trade, with U.S. agricultural product exports totaling $771.7 billion. For many American products, foreign markets now represent more than half of total sales. U.S. agricultural exports now support more than 1 million jobs here at home, a substantial part of the 11.7 million jobs supported by exports all across our country. Expanded U.S. trade overall has added roughly $13,000, on average, to every American family's income. Fiscal year 2015 exports are now forecast to be the third-highest on record, led by a strong performance in bulk commodities such as grains, animal feeds, and oilseeds."

Total grain and feed exports are forecast at $30.5 billion. USDA expects the volume of corn exports to be higher than its February estimate by 1.5 million metric tons. Its new estimate is 46 million metric tons (1.8 billion bushels). The volume increase is largely offset by weaker prices, USDA stated.

Strong early-season sales and commitments support record soybean and soybean meal export volume. "Unit values for soybeans are reduced based on strong competition from Brazil, a weak real, and record U.S. plantings this spring," the report stated. "This reduces the soybean export forecast by $200 million, but is more than offset by a larger soybean meal forecast, raised in response to stronger-than-expected unit prices."

Wheat exports are forecast at $6.1 billion, a $300 million decrease from February's forecast. USDA said lower volumes are largely to blame.

Vilsack also used the news to emphasis the importance of free-trade agreements to the American economy and especially the farm sector. "Exports to countries where the United States lacks the assurances offered by trade agreements have declined this year, highlighting why it is so important for Congress to act and pass strong trade promotion authority legislation," Vilsack said.

The U.S. Grains Council's weekly newsletter highlighted one of the successes of the free-trade agreement with Colombia in its weekly newsletter. That agreement was passed in 2011 and went into effect in May 2012.

For the second year in a row, Colombia is likely to exhaust its duty-free quota, 2.43 million metric tons (95.6 mb) early in the calendar year.

"The Colombian industry estimates importers are planning to purchase an additional 2.6 million tons (102 million bushels) this calendar year," said USGC Regional Director of the Western Hemisphere Marri Carrow. "Out of quota U.S. corn will have a 16.5% duty applied, which is the same for Argentina and Brazil. Capturing these final year sales will really depend on the basis, but current market dynamics are favorable for the United States to maintain its current market dominance."

In the 20 countries where the U.S. has free-trade agreements, U.S. ag exports have been relatively steady, Vilsack said.

"Every day without trade promotion authority, American agriculture suffers as competitors negotiate their own agreements and lower global standards when it comes to environmental impact, consumer safety, and working conditions. USDA will continue to fight to get the best deal for farmers and ranchers, but our ability to open new markets and create new customers is limited without Congressional action."

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

(CZ/BAS)

Posted at 10:54AM CDT 05/29/15 by Katie Micik
 

Monday 05/18/15

ATA Reports Trucking Revenues Grow in Spite of Shortage

OMAHA (DTN) -- Every day, U.S. trucking companies are forced to refuse hundreds of loads due to a short of drivers, and the problem is likely to get significantly worse over the next decade, according to a recent University of Tennessee report.

Grain trucks waiting to unload at Cargill elevator and biodiesel plant in Kansas City, Missouri. (Progressive Farmer photo by Jim Patrico)

"Some estimate the shortage today is about 40,000-50,000 and growing rapidly," a recent report by the Supply Chain Management Faculty at the University of Tennessee stated. "Another estimate has the shortage increasing to over 300,000 drivers before it peaks in 10 years, and that could be catastrophic. Such a shortfall would amount to a 20% gap between demand and supply. One estimate is that only 25,000 new drivers are being added annually, not nearly enough to keep up."

The study reported that there are trucking companies having to refuse hundreds of loads every day due to the lack of drivers, resulting in a major revenue loss.

Reasons for the shortage are plentiful, according to the April 2015 study. Driver wages did not rise as fast as wage rates in general over the 2000-2013 period.

"The current $40,000-45,000 pay rate lags behind overall wage inflation in the economy. On an inflation-adjusted basis, one estimate shows that drivers make 6%-8% less in real terms than they did 25 years ago, in 1990. Thirty years ago, the average truck driver earned four times the wage of a food service worker," the University of Tennessee report stated. "Today the $41,000 average wage is only 1.8 times higher. During much of this time, the margins of trucking companies were constantly squeezed, making significant wage increases impossible. In addition, HOS (hours of service) rules limit the amount of hours a driver can work, which in turn depresses their income since truck drivers are often paid per mile driven."

Another cause of the driver shortage is rules have become stricter for new drivers. Those wanting to obtain a commercial driver's license (CDL) must be 21 years old.

Also, the Federal Motor Carrier Safety Administration (FMCSA) safety compliance and enforcement program (CSA) has likely reduced the driver pool by 5%-7%, according to the study. CSA affects motor carriers, including owner-operators, by "identifying those with safety problems to prioritize them for interventions such as warning letters and investigations. CSA affects drivers because their safety performance and compliance impact their safety records and, while working for a carrier, will impact their carrier's safety record." The CSA also requires a prescreening of drivers before they can be licensed to learn of work history, driving record and any legal problems. Overdrive Magazine said, "CSA's inequities and irregularities remain a topic of large concern all around the industry."

TRUCKING REVENUES TOP $700 BILLION FOR FIRST TIME IN 2014

Despite the shortage of drivers, the trucking industry generated $700.4 billion in 2014, making it the first year in history the industry topped $700 billion in total revenue, the American Trucking Association (ATA) stated in a press release May 11, according to the latest edition of American Trucking Trends. The $700.4 billion in revenue accounted for 80.3% of all freight transportation spending.

"Last year, we saw freight volumes grow significantly," said ATA Chief Economist Bob Costello. "Increases in freight combined with continued tight capacity helped drive revenues, and coupled with lower fuel prices, we saw motor carriers go on a buying spree for new trucks as they replaced older equipment."

In the press release, ATA said that in 2014, trucks moved 9.96 billion tons, or 68.8%, of all domestic freight. While trucking employed more than 7 million people, including 3.4 million drivers, driver shortages have been growing since the beginning of 2015.

"(American Trucking) Trends is a valuable resource for showing just how critical, how essential, our industry is," said ATA President and CEO Bill Graves. "It is one thing to say trucking is our economy's lifeblood, but it is quite another to show it. And (American Trucking) Trends shows it clearly: Trucking is, and will continue to be, the dominant way to move goods in this country."

Over 60% of the grain marketed in the United States is moved by truck, according to USDA. Each quarter, USDA releases a Grain Truck and Ocean Rate Advisory report based on responses from elevators located in nine states that produce the most corn, wheat and soybeans. The report shows truck rate information for a local haul of 25 miles, as well as longer hauls of 100 and 200 miles and diesel fuel costs, both key components for elevators in pricing grain. The ongoing system of data collection establishes a foundation for identifying longer-term trends and shifts in the market that will be valuable in addressing marketing, policy and risk-management issues related to this critical mode of grain transportation.

See the entire 2014 fourth quarter report at http://goo.gl/…

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

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/ES)

Posted at 12:23PM CDT 05/18/15 by Mary Kennedy
Comments (2)
The shortage is not just in transportation. Why should people even attempt to work when S.S. Disability and welfare benefits seem to pay more than working for a living.
Posted by Bonnie Dukowitz at 5:35AM CDT 05/22/15
Many farmers in my area have chosen to buy their own semis for hauling their grain. The ability to haul grain directly to ethanol plants bypassing grain merchandisers at $200.00 a load that can easily equate to an extra 10 to 20 thousand dollars a year in added profits. Not losing valuable harvest time waiting for coop trucks is another incentive. As for corporate companies , the shortage of drivers wasn't created by a lucrative welfare system but as the article points out it was by the inability, or choice of corporations not to pay a suitable wage for a valuable service rendered by today's drivers.
Posted by Mike Durey at 6:51PM CDT 05/25/15
 

Monday 05/11/15

Railroads, Shippers Weigh in on Making Weekly Reports Permanent

OMAHA (DTN) -- Debate over how transparent railroad companies should be about their service performance continues as the Surface Transportation Board weighs whether to make weekly reports by Class I carriers a permanent requirement.

BNSF train moving east along the Northern Transcon. (DTN photo by Mary Kennedy)

After a hearing in Fargo, North Dakota, on Sept. 4, 2014, where the board heard from shippers of grain, coal, ethanol and other commodities, the STB decided it was necessary to begin receiving data from the Class I rail carriers on their weekly service performance. In addition, the board in a decision issued on Dec. 30, 2014, directed the Association of American Railroads (AAR) to provide more information on progress in the Chicago Gateway. The AAR began providing reports on Jan. 14, 2015.

Also on Dec. 30, 2014, the STB issued a notice of proposed rulemaking, in which it proposed to make the weekly reports submitted by the Class I carriers a permanent requirement and make some modifications to the service metrics. Opening comments in that proceeding were received on March 2, 2015, and reply comments were due on April 29, 2015. Once all comments were received, the board stated they will then consider adopting final rules.

The weekly filings have allowed the board and rail stakeholders to monitor performance and have allowed the board to begin to develop baseline performance data. "Based on the board's experience with the reporting to date, the board is now moving forward with a rulemaking to determine whether to establish new regulations for permanent reporting by the members of the Class I railroad industry, and the Chicago Transportation Coordination Office (CTCO) through its Class I members," the STB said.

On April 29, the Alliance for Rail Competition (ARC), a group consisting of 16 various grain boards and commissions, submitted their reply comments urging the board to reject the railroads' arguments. "We also urge the board to implement its proposed rules, and to expand them by requiring reasonable reporting of service data the railroads already gather as to shipments involving less than 50 cars. Serious service problems continue to adversely affect many shippers represented by ARC, et al., including many shippers whose businesses depend on rail shipments of 49 carloads or less. These problems are particularly acute in the Upper Great Plains states, despite small improvements in service quality here and there." Here is the link to the entire comment by the ARC members: http://goo.gl/…

The United States Department of Transportation (DOT) and the Federal Railroad Administration (FRA) said they appreciated the board's efforts to identify and address the challenges facing those who operate and depend upon the rail network. "A healthy and safe railroad system is critical not only to those who ship and receive goods, but to our nation as a whole." They stated that they generally support the board's proposal to require weekly reporting of rail performance data, but provided some additional thoughts for the board to consider in reaching its decision. Here is link to their comments on April 29: http://goo.gl/…

RAILROADS RESPOND

The AAR told the STB they acknowledged the service issues caused by "unforeseen shifts in demand for rail service and a historically difficult 2013-2014 winter season" that led the board to propose rules requiring Class I railroads to report operational data. However the AAR cautioned the board to distinguish between metrics that have been useful in monitoring the specific service disruptions that have occurred and metrics designed to monitor the overall fluidity of railroad operations that may be useful on an on-going basis. The AAR recommended that the board not make "permanent by regulation the reporting of metrics at a granular, commodity-specific level that may not be germane to a specific future service disruption while presenting a misleading view of rail service in normal times."

In their comments on April 29, The BNSF pointed out it has made significant progress in the first quarter of 2015 toward restoring velocity and meeting customers' expectations. "This is reflected in the reports and other tailored network performance information we regularly provide to our customers, as well as the interim reporting we have been providing to the board."

The BNSF told the board it has recognized there were several renewed requests from associations seeking more specialized reporting of service data, including corridor-specific and additional commodity-specific metrics. "The associations seek extensive additional reporting, ranging from expanded commodity-specific measures covering oilseeds, oilseed meal, fertilizer, and vegetable oil (a NGFA request) to average dwell times at each individual interchange for all empty coal unit trains (a Western Coal Traffic League request). Requiring BNSF to provide additional cuts of data for individual commodities or for specific geographic sub-levels on a regular basis would be burdensome and counterproductive to BNSF's efforts to maintain optimal flow across the entire network, consuming critical resources without significant commensurate benefit." Here is a link to the comments by the BNSF to the STB: http://goo.gl/…

Since the service issues in 2014 affected more than just grain shippers, coal and electric companies weighed in as well. "The railroads and the AAR generally urge the board not to adopt any reporting standards at this time or to severely limit any reporting if the board insists on moving forward," they said. "Alternatively, the railroads propose unnecessary delaying tactics, such as meetings with the board where the railroads can privately detail what data they might be willing to regularly report." The coal shippers and National Rural Electric Cooperative Association told the board they support the proposal which, "should ensure that accurate, timely, and complete data reporting remains available to shippers and the board alike, and they repeat their initial request that the board consider certain refinements to the proposal, as well as additional reporting categories."

The STB has not provided a date as to when the final decision on when the Dec. 30, 2014, proposed rule will be issued.

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

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/CZ)

Posted at 10:56AM CDT 05/11/15 by Mary Kennedy
 

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
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