Ship Happens

Oct 21, 2022

Turn on Long Hot Summer Day by Turnpike Troubadours and keep on reading…

But first, railroads: While there’s been a bright light in shipping agricultural products by rail in the fourth quarter, a new tide is shifting because of labor.

We all remember the potential railroad strike that was narrowly avoided, which would have cost $2B per day in lost economic activity. Well, now workers aren’t too enthused to hop back on the train… so to speak.

Get a half a day off with pay: When COVID hit, thousands of railroad employees were furloughed. When COVID restrictions lifted and things got a little better, workers weren’t pumped to go back to work, with issues mostly tied to wages and paid time off for medical appointments. Hence potential strikes.

Old tow boat pickin’ up barges: Now there are issues with shipping exports of soybeans and corn because the Mississippi River is the lowest it’s been in more than three decades. A stretch of the river was closed to dredge sediment from the bottom, and they found a 19th century shipwreck.

But shippers are feeling like they’re walking the plank because low rainfall and low river levels means barges have loading limitations to avoid hitting rock bottom.

Shippers looked into using shuttle trains, but they were bid up to $2K per car over tariff. With prices like those, sellers aren’t in a hurry to buy freight if they don’t have to.

Large barge: Barge prices are setting records. According to the USDA, the barge rate for export grain at St. Louis was 1,250% of tariff and up 58% from a year earlier (as of Sept. 27) and a whopping 95% above the five-year average.

The cost of shipping commodities like corn, soybeans, and other grains reached $105.85 on Oct. 11. Compare that to $28.45 on Oct. 5, 2021—ouch.

The low river also impacts the rate of exporting products; soybeans and corn are trailing their normal autumn pace.

The trucking track: Trucking rates have been falling because of declining demand and increased availability. Drivers are resisting longer hauls, they are focused on fall row crop commodities, and farmers drive trucks themselves.

At the beginning of October, contracted rates for truck freight averaged $2.71 per mile. Spot rates, or short-term, transactional pricing that reflects the real-time balance of supply and demand in the market, were at $2.64 per mile.

Lots to unpack… both in keeping up with the news of shipping exported grain, and with unpacking barges.