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Grain Barge Bottleneck

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Well-known member
Feb 10, 2005
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Montgomery, Al
DES ARC, Ark. -- The world wants Jason Holloway's milo crop. But his local elevator doesn't. At least that was the message it sent when the local cash price plunged by 50 cents in early September.

The Des Arc, Ark., farmer doesn't understand everything that's happening in the aftermath of Hurricane Katrina, but he is sure of a couple of things. Elevators are discouraging the delivery of grain by farmers because of transportation bottlenecks along the Mississippi River and the Port of New Orleans. In addition, increased costs for barge freights are being passed on to grain farmers.

Farmers like Holloway with no on-farm storage and a crop that can't wait to be harvested, see the disincentive to deliver grain in the form of low cash prices for their crops. In Holloway's case, it's even tougher because of the way his loan deficiency payment for milo is calculated. The loan rate for milo is $1.95, but he ended up with a LDP of only 22 cents to add to a harvest price of $1.50.

The basis for most grain crops "has crumbled," said Jerry Gidel, president of Midland Research, Chicago. "Basis was seasonally getting weak, then it widened out dramatically."

Gidel believes the basis widening will be short-lived, although this is of little consequence to grain producers needing to move crops now. "We still have a lot of issues about barges sitting on the river and we need to get things moving again. But personally, I think it's going to improve rather than get worse."

Hope had risen among grain producers with the news that despite substantial damage to waterways and grain handling facilities from Hurricane Katrina's 140-mile-per-hour winds, cleanup is under way, ships again are moving and a majority of elevators in the Gulf region are resuming operations at reduced levels of activity.

Indeed, things are looking up. Bunge North America, recently announced that operations are under way at its export elevator in Destrehan, La., near New Orleans. The facility was shut down Aug. 27, because of mandatory evacuations ahead of Hurricane Katrina.

According to Deborah Seidel, public affairs officer for Bunge, the export elevator now has staff to run "around the clock."

Seidel said the employees "just walked into the facility within a couple of days of the hurricane, bless their hearts. We're still trying to account for three employees."

Seidel said the most troublesome bottleneck today is the backup of barge traffic on the Mississippi River, which will take some time to smooth out, especially with the port operating at below capacity. Bunge had its power restored by the city of New Orleans, "but there are a lot of places that aren't unloading, and there are lot of barges headed south that can't be unloaded.

"We think we will be fully operational from the export elevator side in a day or so," she said. "But the size of the vessels coming in is still restricted and our soybean processing facility is still not operational."

Seidel said that Bunge has loaded its first ocean-going vessel since the hurricane. The ship — carrying identity preserved products — left the port Sept. 5 for Europe.

Steve Nail, president, Farmers Grain Terminal, Greenville, Miss., said the problem at the Gulf, "seems to be getting better day by day. There have been barges unloaded at the Gulf and ships loaded. My understanding is the Gulf is at about two-thirds capacity.

Nail says that a fully operational port will help alleviate the barge bottlenecks, "but there could be a good deal of pain between now and then. Barge freight has doubled previous highs since the hurricane."

The high freight costs are simply a matter of supply and demand — there aren't enough available empty barges to accommodate the harvest, according to Seidel. "Storage facilities are tight and the normal flow of barge traffic up and down the river is completely disrupted."

The bottom line is that the higher costs are being passed on to the farmer as lower cash prices paid for their crops.

Holloway noted, "Back in the summer, we booked some of our milo at $2.54. But I refrained from booking any more because of the dry weather up north. Right after the hurricane, the basis was 20 cents to 25 cents under. It has since widened to nearly 50 cents a bushel.

"When I sold the milo that I didn't have booked, my market price was $1.50 and my LDP was 22 cents. I got $1.72. That's a kick in the butt. From this and what I have booked, I'm going to average about $1.90 a bushel. My uncle waited a little longer than I did and got $1.35 cash on his milo and a 24-cent LDP. That's $1.61."

Holloway figures he'll gross about $138 an acre on his milo crop this year, considerably less than he had anticipated. "I have a little over $100 an acre cost in it so far. But that's not counting diesel, my time and labor. I might break even. If the DLP had been there to kick it up, I might have made a little money and my landlords might have made a little money."

Holloway adds that the world price for milo has risen lately, indicating there is strong demand for the grain. If only there were a way to get it out of the country cheaply.

In southwest Louisiana, where harvest of some crops is nearly complete, local storage space is virtually nonexistent because of a good rice harvest, according to Michael Hensgens of G&H Seed of Crowley, La. But rice millers are trying to get rice onto the market to make room.

Keith Fontenot, LSU AgCenter county agent in Evangeline Parish, said farmers are worried about the lack of storage space for their crops and the problems in shipping grain out. "A lot of guys around here ship their beans out directly," he said.

Keith Normand, LSU AgCenter county agent in St. Landry Parish, said most soybean farmers will start harvest shortly, although some have already started cutting early-maturing beans. Corn and sorghum harvests are almost finished.

"For the most part, farmers don't have storage facilities, and many local elevators have been out of operation. So they've been depending on going from the farm to port facilities," Normand said.

Holloway, talking on a cell phone inside his tractor cab in early September, said, "The more I get to thinking about it, the madder I get. All these costs are going to trickle down to the farmer. But the farmer can't pass those costs on. The only thing he can do the next year is go to the field with broken-down equipment and less fertilizer. If you do that, you're shooting yourself in the foot.

"I have a lot of kinfolk that are wanting to retire," he said. "But they don't know if they can afford to after this."
How many suppliers (etc.) will end up billing producers for the added expense of fuel? How many suppliers/service providers do you have coming down the laneway?

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