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High barge rates widen elevator basis

Agriculture.com Staff 05/16/2006 @ 12:20pm

This year has seen especially high barge rates. Going back to last fall, the Katrina-imposed shutdown of the Gulf caused barge flows to stop and rates to skyrocket once traffic re-opened. Along the Illinois River, barge costs to the Gulf shot up from 44 cents a bushel to well over 90 cents a bushel in a few short weeks.

Although conditions improved in the fall and winter, today barge rates still remain well above historic norms. Comparing current barge rates at various river terminals to their respective 3-year average shows that current costs are nearly double what they normally are at this time of year.

In the Upper Mississippi river region, rates are up about 30 cents a bushel over normal. Even at Memphis, where barge rates are lower, the increased cost has added another 14 cents a bushel over the 3-year average.

High barge rates are a result of several key drivers. The obvious factor is higher fuel costs which is impacting all forms of transportation. Second, large stockpiles of grain and competing uses for barge traffic are keeping rates on the rise as well.

The bottom line is higher barge rates hurt basis levels at river terminal markets and backup to the country elevators. With barge rates increasing 7 to 9 cents a bushel in the past two weeks, the impacts have been apparent along key river markets.

Losses of 3 cents or more in the last week were common from Southern Missouri to Minnesota for corn basis. Much of the rest of the country saw only modest losses of 1 to 2 cents a bushel. The Plains, however, managed to buck the trend with slight gains in basis in the past week in response to drought conditions.

Looking forward for the remainder of the summer, barge rates show few signs of slumping. The supply and demand situation that has led to high barge rates should only perpetuate more this summer. Look for barge rates of 5 to 10 cents a bushel higher for the remainder of the summer. For those marketing grain around key river terminals, be wary of long basis positions over the next few months.

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This year has seen especially high barge rates. Going back to last fall, the Katrina-imposed shutdown of the Gulf caused barge flows to stop and rates to skyrocket once traffic re-opened. Along the Illinois River, barge costs to the Gulf shot up from 44 cents a bushel to well over 90 cents a bushel in a few short weeks.

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