Market Matters Blog

Barge Freight Surges Higher

Mary Kennedy
By  Mary Kennedy , DTN Basis Analyst
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(Chart courtesy USDA)

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

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

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

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

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

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

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

Follow Mary Kennedy on Twitter @MaryCKenn

(CZ)

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