The Dry Bulk Ag Update * better than starbucks!
From our friends at the USDA
In the latest World Agricultural Supply and Demand Estimates (WASDE) report, USDA projected record corn and soybean production for the 2016/17 marketing year, and so far the transportation system is expected to accommodate the potential increase in grain movements with little or no strain. Total grain exports are forecast 10 percent higher than last year. Year-todate grain rail carloads are comparable with last year’s volume, despite a drop in total traffic for U.S. Class I railroads in 2016. For most of 2016, navigation conditions have been favorable on the inland waterway system and barge supply has been more than adequate for the current demand. Total grain barge deliveries to the Gulf for the year have been up 30 percent compared to the 5-year average. Ocean freight rates for shipping bulk commodities, including grain, have remained low due to overcapacity in the market. The rates are lower than last year and the 4-year average. Average diesel fuel prices have been stable the majority of the summer, however, the Energy Information Administration (EIA) forecasts prices to slowly increase through the end of the year and into 2017, as crude oil inventory supplies grow.
According to USDA’s September WASDE report, 2016/17 crop production for the corn, soybean, and wheat crops are expected to increase from the previous year. Total production for all three crops is forecast to reach 21.6 billion bushels (bbu) this fall, 10 percent higher than the past year (table 1). USDA projects total grain exports to reach 5.1 bbu, 4 percent higher than last year. Outstanding (unshipped) export sales for each of the major grains are noticeably above the 4-week averages. Unshipped balances of corn, wheat, and soybeans are 46 percent above the same time last year
Since early June, grain movements by rail have been particularly high (figure 1), helping the railroads offset drops in coal, chemical, and other commodity traffic. In 2015, grain accounted for 5 percent of the total carloads (8 percent of the total tonnage) originated by U.S. Class I railroads, according to the Association of American Railroads (AAR).1 However, through September 10, year-to-date (2016) grain carloads represented 9 percent of the total U.S. Class I carloads.
As of September 17, there have been 25,405 grain barges unloaded at the Mississippi River for export during 2016, 30 percent higher than the 5-year average (table 2). With the third quarter nearly complete, the weekly average for 2016 is 60 percent higher than the average. With projections of increased corn exports and possible record soybean exports, barge movements in the fourth quarter are expected to remain at above average levels. Typically, the largest barge unloads occur in the fourth quarter as newly harvested grain and oilseeds are shipped to foreign buyers.
Ocean freight rates for shipping bulk commodities, including grain, remained low as excess vessel supply persists in the market. The rates are still lower than last year and the 4-year average. As of September 15, the cost of shipping bulk grain from the U.S. Gulf to Japan was $30 per metric ton (mt), a 12-percent decline from the same period last year, and 33 percent lower than the 4-year average. The cost of shipping from the Pacific Northwest was $16.250 per mt, a 10 percent decline from last year, and a 35 percent decline from the 4-year average. Grain loading activity in the U.S. Gulf continued to be strong. During the past 4 weeks, an average of 49 ocean-going grain vessels were loaded per week, and 45 vessels were either being loaded or waiting to be loaded. An additional average of 67 vessels were expected to be loaded in the next 10 days. Ocean freight rates should continue to remain low at least in the near term until freight markets improve sufficiently to soak up the excess vessel capacity