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Barge rates assist grain supplies in widening basis

Agriculture.com Staff 06/15/2006 @ 9:43am

Large grain supplies are blamed for current wide basis levels at the local elevators, but sharply higher barge freight rates are co-contributors, industry experts told Agriculture Online on Wednesday. Because of such high demand for barges, rates have increased to levels not seen for many years, experts said.

As of mid-June, to book a barge to haul grain, the rate is $12.68 per ton compared to $8.00 per ton normally, according to one Mississippi elevator terminal.

Specifically, it's costing $0.28 per bushel to ship grain, compared to $0.14 in year's past, the Mississippi elevator spokesman said.

In addition, the government's recent low water advisory on the Missouri River, which feeds the Mississippi River, has slowed barge traffic and pushed grain transportation costs even higher.

As a result of higher shipping costs, farmers are seeing basis levels for corn and soybeans ranging between $0.30-$0.40 under Chicago Board of Trade futures prices.

Mike Sulzberger, Prairie Central Co-op, Weston, Illinois, said although he isn't located on the river, his basis level is indirectly affected by rising barge rates.

"For this time of the year, we are seeing some of the highest barge rate pricing levels ever," Sulzberger said. In some areas, barge freight rates have went up by 45 tariff points in June.

Higher barge rates stem from higher fuel costs, and fewer barges in the barge system, sources said.

The barge industry is seeing a change in priority shipments, experts said. In the past, barge companies would send a barge up the Mississippi empty, then haul grain back down the river. What has changed is that barge companies are being paid to haul more products up the river. Along with demand, rates for shipping have gone up.

"We're not commanding the attention of the barge market as we once did," said Sulzberger. "The grain business is still important but not as dominant." Mike Sulzberger, Prairie Central Co-op, in Weston, Illinois, said.

Most of the nation's corn, soybeans and wheat produced in ten Midwestern states rely on barge transportation. The Mississippi, Illinois, Ohio and Missouri Rivers border these states.

The heart of the corn and soybean production in Illinois and Iowa lies 700 to 900 miles as the crow flies from the Gulf ports in New Orleans. Minnesota is over 1200 miles from the Gulf.

Large grain supplies are blamed for current wide basis levels at the local elevators, but sharply higher barge freight rates are co-contributors, industry experts told Agriculture Online on Wednesday. Because of such high demand for barges, rates have increased to levels not seen for many years, experts said.

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