Milling & Baking News - May 8, 2018 - 22

Transportation and Distribution

Mississippi River navigation season
began April 11 when the U.S. Army
Corps of Engineers determined the
northernmost stretches of the river
were no longer closed by ice accumulations. It was the latest opening date
on record, except for delays caused by
unrelated flooding in some years.
Barge freight rates for shipping grain
ranged from $14.85 per ton on the lower
Mississippi to $41.78 per ton on the upper Mississippi at mid-April, up less
than 5% to more than 15% from a week
earlier and up 130% to about 200% from
a year ago, according to the U.S.D.A.
The first ship of the season began

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for intervention from the Department
of Transportation's Surface Transportation Board (S.T.B.) In response, the
S.T.B. on March 16 requested all Class 1
railroads provide their service outlook
plans for near term and the remainder
of 2018. The board also asked each railroad for regular updates on locomotive
availability, employee resources, local
service performance, service demand,
communication strategies and capacity
constraints. All seven railroads had responded to the S.T.B. by April 5.
Grain shippers noted that the Union
Pacific announced a $100 per car rate
increase, which other railroads likely

will follow. Rail rate increases of 3% to
5% likely will be common around June
1 or July 1.
Further adding to costs for grain
shippers are railroad fuel surcharges
that have been rising since September 2017. Surcharges were below the
three-year monthly average throughout 2017 and finally moved above
the average in January 2018 when the
average on-highway diesel fuel price
from the Energy Information Administration (E.I.A.) moved above $3 per
gallon. The E.I.A. diesel fuel price,
used to calculate both rail and truck
fuel surcharges, rose steadily from
July 2017 to mid-February, took a brief
respite and has been rising again since
late March to the highest since January
2015 as of April 23 at a national average of $3.13 per gallon. The U.S.D.A.
noted that diesel exports have been
strong and that prolonged cold weather further increased distillate fuel supplies, which are used to produce both
residential heating oil and diesel fuel.
Rail fuel surcharges reported by the
U.S.D.A. ranged from zero to as much
as $346 per car, or about 9c per bu.
Barge and ocean freight update
The "unofficial" start to the Upper
22 / May 8, 2018

Milling & Baking News

taking on grain April 15 at Duluth-Superior export terminals for shipment
via the Great Lakes.
Ocean rates for shipping bulk grain
eased in January and February but began rising in March as freight demand
increased, the U.S.D.A. said. Firstquarter rates for shipping bulk grain to
Japan from the Pacific Northwest averaged $24.25 per tonne, to Japan from
the Gulf averaged $44.27 per tonne, and
to Europe from the Gulf were $16.82
per tonne. Rates were slightly lower in
most cases from the fourth quarter of
2017, but rates were up more than 20%
from the same period a year earlier and
from the four-year average for routes to
Japan and were up about 15% from a
year earlier and were up 5% from the
average for routes to Europe.
The U.S.D.A. in its April 19 Grain
Transportation Report said ship owners were optimistic about the turnaround in ocean freight demand. New
ship deliveries were stable and fewer
vessels were being demolished, resulting in a slight increase in fleet size,
which may prolong the glut of vessel
supply and put potential downward
pressure on ocean freight rates.
The tight truck freight situation was
allegedly having an impact on ocean

freight as well as other means of shipping. The Federal Maritime Commission (F.M.C.) said U.S. cargo owners had
forwarded complaints to the commission claiming some ocean carriers were
unilaterally changing service contract
terms by canceling the port/container
yard to final customer destination leg
of cargo shipments due to an alleged
lack of inland truck availability. The
enforcement arm of the F.M.C. initiated
an expedited inquiry into the carrier actions, sending letters on April 20 to the
lines whose actions were questioned
seeking information on timing, fairness
and lawfulness of the alleged unilateral
changes to ocean carriers' obligations
for inland trucking services. Responses
are requested within 30 days.
Grain movement down year-to-date
The multitude of issues facing carriers this year may have been mitigated
somewhat by lighter grain movement.
Cumulative marketing year wheat, corn
and soybean movement of grain for export through April 12 was 89,915,000
tonnes, down 15% from the same time
a year ago, the U.S.D.A. said in its April
26 Grain Transportation report. Movement of all wheat totaled 19,780,000
tonnes, down 11%, corn was 27,735,000
tonnes, down 20%, and soybeans totaled 42,401,000 tonnes, down 13%. The
marketing year ends May 31 for wheat
and Aug. 31 for corn and soybeans.
The significance of trucks and rail
for moving grain domestically cannot
be understated. The U.S.D.A. estimates
that trucks move about 64% of total
grain, including about 20% for export
and 78% for domestic needs. Trucks
primarily get grain off the farm and to
the first point of collection and are most
important for movement within about
300 miles of origination. But trucks are
significant for transporting agricultural
products and usually are the only option for the "last mile," or delivery to
the final destination for finished goods.
While typical seasonal weather and
supply-and-demand factors will continue to affect availability and rates
for shipping agricultural products by
truck, rail, barge and ocean vessel,
the unsettled truck freight market has
added a new wrinkle even if trucks
are not the main movers of grain over
long distances. Time will tell as the
year goes on just how significant that
impact will be. But what is certain is
that truck freight rates have gone up,
and many expect they will go up again
when new contracts are negotiated later this year or next year. MBN
- Ron Sterk
bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - May 8, 2018

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