Digging for Increased Bushel Capacity

Five feet.

Five feet stand between the American soybean industry and an additional $461M in annual revenue. The path to the cash is the Mississippi River Ship Channel Dredging Project which will increase the depth of the last 250 miles of the river to 50 feet versus its prior depth of 45.

Does five feet really make a financial difference? Yes: 500,000 bushels of difference. Most large ocean-faring vessels can carry 2.4M bushels of soybeans out of the ports of the Mississippi River. And each foot of depth will add an additional 100,000 bushels, to expand that capacity to 2.9M bushels.

And the last ~250 miles of the Mississippi are vital as 60% of all U.S. soybean exports travel this portion of the river. Not to mention that four of the nation’s 15 largest ports are located here.

Fun fact: These ships normally take more than a day to load. Most of them are destined for China, and it takes 30 days on the open seas to make it to their destination.

Return on investment: The depth increase will ultimately save 13 cents per bushel in freight, and loads will increase by 21%. From a different angle, it will return $7.20 for every $1 spent on construction and maintenance.

Soundbite: “This project is a big, big deal for the export strength of U.S. agriculture in the future, and it’s also very significant for farmers in the near-term,” Mike Steenhoek, executive director of the Soy Transportation Coalition (STC), said.

What lies ahead: The total estimated cost of the Mississippi River Ship Channel Dredging Project is $270M, and it should be complete by the end of 2022.

Live Shot: Trucker Sees His Mileage Rates 🚀

You may have noticed a trend in Magnetic the past month. ‘Shortage’ – the supply chain and market-busting term – has shown up 13 times in the past 8 newsletters.

And it’s not done yet. The issue this go-around? Truck drivers.

With trucking companies already reporting significantly fewer drivers than this time last year, the future doesn’t look very bright. The American Trucking Association is predicting a shortfall of over 100,000 drivers by 2023.

And this is where the rubber meets the road: Over 70% of all goods shipped across the country are carried…you guessed it…on a truck. And the shortage is concerning many producers.

The Golden State woes. With the carrot and onion harvests in Southern California coming in fast, seasonal trucker demand is up, and companies report that they have around 30% fewer drivers than needed.

But wait, there’s more. Driver demand will be going up as summer rolls around and the tomato and nut harvests kick into high gear.

Yet, with the trucker shortage, getting the product east-bound and down may prove tricky. And more ominous consequences could be on the horizon.

According to Joe Antonini, the top dog at a Stockton-based trucking company, “crop spoilage, waste, and crops not even being able to be harvested” are potential outcomes of the summer driver shortage.

What lies ahead: California growers are hoping for a weight-limit increase to help with transport (a little) this summer. But with amped-up demand, an aging driver pool, and a host of other issues, the problem isn’t likely to hit the road anytime soon.

Testy Train Track Bidding War

If you’re looking for a good deal on a cross-continent railroad, well… let’s just say it’s not a buyer’s market.

Just weeks ago, Canadian Pacific Railway (CP) revealed it had agreed to purchase the Kansas City Southern railroad for a sweet $29 billion. The purchase would create a 20,000-mile North American mega-track allowing commodities to move via rail across the United States, Mexico, and Canada.

And timing couldn’t be better: As pandemic-related disruptions begin to subside, supply chains are moving commodities around at lightning speed.

But not so fast…

Rival railroad behemoth Canadian National Railway Co. (CN) noted the proposal and decided to one-up their competitor. CN slid a contract across the table with a $33.7 billion offer.

Chairman of CN, Robert Pace, spoke to the superiority of their offer being a ‘more complimentary strategic fit’ and having ‘enhanced benefits for employees and local communities.

Those are fightin’ words. CP clapped back at the petty move, stating, ‘The Canadian National management team has significantly underperformed over a decade and has a track record of underdelivering against its own projections.

Let the bidding war begin. Kansas City Southern said it would evaluate the CN offer and ultimately give CP a chance to raise its bid if they found the deal superior.

Regulation might decide the victor. The heavy geo-overlap between CN and Kansas City Southern could make it hard to get approval via the Surface Transporation Board. Now many are speculating which will matter more: price or getting a deal over the finish line.