US Containerized Grain Exports Expected to Drop

US Containerized Grain Exports Expected to Drop

Containerized volumes of grains and soybeans from the U.S. will see double-digit declines in the coming months as agricultural exports are affected by this year’s drought, which has decimated crop yields, according to one leading analyst.

Total U.S. grain and soybean exports for the 2012/13 marketing year are forecast to be down 8 percent from the previous year. Although total U.S. wheat exports are expected to rise by 19 percent and sorghum exports are expected to be up 58 percent year-over-year in the coming marketing year, corn and soybean exports are forecast to decline by 35 percent and 1 percent, respectively.

“Because the export forecasts for corn and soybeans are down fairly sharply for this marketing year, and they dominate containers loaded with grain and soybeans, the use of containers for grain and soybean exports are then forecast to be down 18 percent during 2012/13,” said Ken Eriksen, who heads the Transportation, Industrials and Energy services group at Informa Economics.

The 2011/12 marketing year saw the use of containers for grains and soybeans — a key element of backhaul business for many lines on trans-Pacific routes to Asia — rise to its third highest level ever at 158 million bushels. However, corn and soybean crops were hit by low snow melt earlier in 2012, and this was then compounded by high temperatures and very low precipitation levels across large swathes of the Midwest and Central Plains states over the summer.

The U.S. Department of Agriculture declared huge belts of farming land as agricultural disaster areas, and over half of the nation's pasture and rangeland was rated as in poor to very poor condition in September. “The drought really wreaked havoc on crop potential and supplies,” said Eriksen.

“Containerized volumes are currently running about 3 percent to 4 percent of current weekly export inspections reported by the Department of Agriculture,” he said. “For the rest of the marketing year September through August the volume of grains and soybeans expected to move in containers will be down considerably from previous years and commensurate with the current low export outlook.”

Eriksen also said conservation of water flows off the Missouri River, which feeds into the Mississippi River near St. Louis, could see barge navigation on this stretch of river halted due to extremely low water and unsafe navigation conditions in the coming days and weeks. “This will be an on-going feature unless we receive considerable rain and a deep snow pack for the spring melt off,” he said. “The current weather models are not setting up to provide much rain or snow.”

Even though the closure of waterways could see some diversion from barge to rail, which usually favors containerization of grain and soybean exports, after such a poor harvest this will still not prevent year-on-year containerized volume declines. “The use of rail has its issues trying to accommodate the high volume of grain and soybeans that move during the winter off the upper Mississippi River including the Illinois River,” Eriksen said.

“If the Mississippi River is closed I doubt much will revert to container in the short run, but maybe this will happen in the long run if there is diversion to rail, but not at sufficient levels to alleviate the volume that otherwise moves by barge.”

Contact Mike King at michael@borderline.eu.com.