The higher corn and soybean futures have inspired farmer selling, which is creating a demand for barges on all river segments. Demand for old-crop winter wheat to Brazil out of the Gulf has been steady, as well. On June 8, the middle of last week, Ceres Barge, LLC, reported the market was up on old and new crop barges"as the higher board generated a huge grain movement on almost all river segments. The June/July slots are getting booked up quickly. As of Friday, there were some higher values in various slots, mainly July."
New-crop barge freight has jumped at least 50% to 60% as both the soybean and corn new crops are so far in good condition and are on pace for a large harvest in the fall.
Barges in some corridors are also being sold with "terms," which means shippers need to load barges and release within "free time" or face penalties. This is due to the fact that barge freight is higher in the coming months versus freight costs for June/July. Extra penalties on top of demurrage will discourage shippers from buying cheaper nearby freight and holding it. For example, freight in St. Louis corridor is 225% over tariff for June versus 475% in September and 550% in October. All corridors have similar differences in nearby freight costs versus deferred.
The cost for new-crop secondary rail shuttles rose late last week as high as $1,000 per car over tariff for first-half October and $1,400 for second half. As of June 9, costs were at $800 for first half and $1,500 for last-half October. Freight for June also rose the past week with first-half June at $50 per car and last half at $200 per car. One week ago, June was trading at negative numbers.
One thing to remember is that railroads parked locomotives -- otherwise known as "power" -- and furloughed workers in the past six months due to lack of grain movement. A BNSF worker in the Northtown yard in Minnesota told me there are orders to start returning power to service, and BNSF shuttle loaders in eastern North Dakota mentioned they expect parked shuttles to be back in service by harvest.
LOWER RAIL TARIFFS WILL HELP MOVE LARGE WINTER WHEAT CROP
It's no secret the U.S. is looking at a large crop of wheat this summer and early fall. The first wheat crops, hard red and soft red winter, are starting to come off the fields in the south and harvest will head north into July. Yields are expected to be near records in some areas, and USDA on Friday confirmed it in the June WADSE report. "Projected production for 2016/17 is up 79 million bushels mainly on improved prospects for the hard red winter wheat crop in the Great Plains following excellent growing conditions throughout the spring months. Consequently, the winter wheat yield is forecast to be record high," according to the report.