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Low water, lock repairs send US river freights soaring
[CHICAGO] Low river levels and back-ups at ageing locks are wreaking havoc on export-bound grain barge shipments on the Mississippi River system just as US farmers need to ramp up deliveries of their bumper harvest of corn and soybeans.
Barge freight rates surged to a three-year high on Friday as a key stretch of the Mississippi River fell to near-record lows and as low water and emergency repair work on a 90-year-old lock and dam on the Ohio River delayed dozens of barge tows, traders and shippers said.
Exporters, meanwhile, scrambled for supplies to meet shipping commitments out of the Gulf Coast amid a growing back-up of bulk cargo ships waiting to load soybeans, they said.
The shipping woes were heaping more pain upon a US farm sector already struggling with low commodity prices and a global grains glut, threatening sales just as rival South American exporters leave the stage.
"The river's a mess right now and I think it might be getting worse before it gets any better," said a Minnesota-based soybean trader who asked not to be named because he was not authorized to speak with media.
Shippers said they have been ordered to load barges with 9 or 9-1/2 foot drafts, instead of 12 feet or more normally, on the lower Mississippi River to keep them from grounding. As a result, each barge holds around 25 per cent less grain so shippers need more barges, they added.
The Mississippi River and its tributaries are a key pipeline for moving grain from Midwest farms to export terminals along the Gulf Coast, where about 60 per cent of US grain and soybean exports exit the country.
Spot barges in the Memphis to Cairo, Illinois, market, an acutely low-water section of the river system, traded at 900 per cent of basic tariff on Friday afternoon, up more than 525 points in the week, barge traders said.
Spot rates were up 300 points on the lower Ohio and mid-Mississippi river and nearly 200 points on the Illinois.
Little rain is expected in the lower Mississippi River valley over the next week, said MDA Weather Services meteorologist Kenny Miller.
"They're going to go down, that's near certain at this point," he said of river levels.
The latest National Weather Service forecast shows the river at Memphis could fall next week to just 4-1/2-feet above the all-time low in 1988.
The shipping woes are also backing up grain supplies at river elevators, traders said.
The spot basis at a river elevator in Davenport, Iowa, fell on Friday to 72 cents a bushel below Chicago Board of Trade November futures, the lowest since at least 2008, according to Reuters data.
Meanwhile, buyers at Gulf terminals were scrambling for supplies to meet export commitments, sending spot CIF soybean premiums to a one-year high as more than 50 bulk vessels are waiting to load at the port, traders said.
One large shipper paid 80 cents over futures for more than 300,000 bushels of soybeans this week, a three-year high.