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Grain Shipping Troubles on the Rivers Run Deep

Farmers are urged to be proactive with grain buyers.

DES MOINES, Iowa -- As the Mississippi River levels remain high and barge traffic slows, the impacts on grain trade continue to build.

Greg Lumsden, Cargill’s MarketGuide product line leader, says that farmers will be having delays with grain delivery.

Therefore, it’s going to be real important for farmers to be proactive and communicate well with their grain company or local elevator.

“All of us are in this together and it’s a huge mess,” Lumsden says.
 

Record Levels On Mississippi River

Last Thursday, the Mississippi River crested at 22.64 feet, a new record-high level, and 8 feet above flood stage.

This week, the river level is getting a slight reprieve with a few dry days. However, more rain is falling Wednesday, and the shipping delays for Cargill and others remain, according to Lumsden.

“The Mississippi River is absolutely a mess, up and down,” Lumsden says.

“We have continued record water levels downstream at the Gulf of Mexico. And that has been going on for almost five months. This has reduced shipping capacity in the Gulf and at most of the river locations.”

For instance, the St. Louis harbor is projected to be closed through May 10, Lumsden says.

There will be major grain shipping impacts all of the way to the northern part of the Mississippi and all of the way to the south.

Cargill, a major multinational grain buyer, seller, and shipping company, operates 13 elevators along the Mississippi River and nine along the Ohio River.

“Of all of our river assets, we only have five that are loading out grain, right now,” Lumsden says. We have four open on the Ohio River and just one at West Memphis, Tennessee, loading out on the Mississippi River. Everything going north is at extremely reduced capacity status, where we are trying to keep going to allow producers to dump, but mainly those locations are completely shut down for the next two weeks.”

Cargill, along with some other major grain players, is loading out some corn, soybean, and wheat shipments in east St. Louis, but with very reduced capacity.

“The barges can’t be loaded as full as usual, due to the loading issues,” Lumsden says.

North of St. Louis, grain shipping is really on an elevator-by-elevator basis, he says.

“We’re trying to stay attuned to what farmers are looking to move. Some elevators are accepting corn only this week, some have to shut down periodically, and others are opening up a window to take some soybeans, all at reduced capacity,” Lumsden says.
 

Shipping Alternatives

So, when you can’t ship the grain on the river, switching destination points or railing the grain are the next options.

When you look at the U.S. river system, the Missouri River recently flooded, now the Mississippi River is flooding, leaving the Illinois and the Ohio River as major alternatives.

“Where possible, we are trying to take advantage of the Ohio River. But, up north, on the Mississippi River, locations are railing out grain to other domestic markets to open up some storage space,” Lumsden says.

River elevator locations are looking at switching delivery contracts, letting producers fill contracts at other facilities. Yet, when a farmer is selling to an elevator along the river right now, there aren’t too many options. All of the industry players are having to do creative things, as the wet spring continues.

“With farmer-selling being slow (due to low prices), a lot of these domestic markets, whether it’s feeders, ethanol plants, or processors, are really wanting the corn. So, if we have to freight it (corn) longer, or jump through some hoops, the endusers are willing to work with us,” Lumsden says.

Basis Levels

The shipping delays on the flood-ravaged rivers have done some interesting things to the local elevator basis levels, Cargill’s MarketGuide leader says.

“The fact that farmers are less likely to be selling during these low prices is good news. If we had normal farmer movement, it would really be pressuring basis levels. With the lack of farmer movement and that domestic markets are bidding up and wanting that grain, it’s keeping some basis levels intact. Basis levels, along the river, are lower than historic levels. But you are also seeing some of the Southern markets and Ohio River locations that are able to load out have better basis prices,” Lumsden says.

Once the rivers calm down, maybe in late summer, basis price levels could normalize, he says.
 

Looking Forward

It may be up to a month to get the river levels to return to normal, Lumsden says. Grain shipping will remain troublesome for all parties involved.

“Our team is talking to barge freight people, merchants, elevator managers, are all saying that the problems on the river will be around beyond a month. Once the river is stabilized, only then will the dredging begin on the river channels, repair of docks and load-out facilities.”

Lumsden added, “Getting the cleanup finished could cause grain shipping logistical issues all the way through the summer. It won’t be full-steam ahead until well into the summer growing season or even the beginning of harvest.”

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